HE  CONTROL  OF  TRUSTS 


Clark 


as 

fVI 

m 

CO 


"H^:^^^ 


y\(\f^ 


JCA  PEIXOTTO 
J  864  "1941 


D 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/controloftrustsaOOclarrich 


THE    CONTROL   OF   TRUSTS 


j2^^^ 


THE 


CONTROL  OF   TRUSTS 


AN  ARGUMENT  IN  FAVOR  OF  CURBING 

THE  POWER  OF  MONOPOLY  BY 

A  NATURAL  METHOD 


BY 


JOHN  BATES  CLARK 

PROFESSOR   IN  COLUMBIA  UNIVERSITY 

AUTHOR  OF  "  THE  PHILOSOPHY  OF  WEALTH  "  AND 

"  THE  DISTRIBUTION  OF  WEALTH  " 


THE   MACMILLAN    COMPANY 

LONDON:  MACMILLAN  &  CO..  Ltd. 
1902 

AN  rights  reserved 


■^trSfCA   PCfJCoTTO 

Copyright,  igoi, 
By  the  MACMILLAN  COMPANY. 


Set  up  and  electrotyped  October,  1901.     Reprinted  July, 
X902. 


NorfaooU  iPresa 

J.  8.  Cushing  &  Co.  —  Berwick  &  Smith 
Norwood  Mass.  U.S.A. 


GIFT 


PREFACE 

The  purpose  of  this  little  book  is  a  modest 
one.  It  does  not  attempt  to  duplicate  work 
which  has  been  well  done  by  others.  It  con- 
tains no  history  of  trusts  and  no  description 
of  the  forms  that  they  are  now  taking.  It 
refers  the  reader  to  the  works  of  Professors 
Jenks,  Ely  and  Von  Halle,  and  to  the  reports 
of  the  Industrial  Commission,  for  facts  concern- 
ing these  consolidations  and  confines  itself  to 
the  one  object  of  advocating  a  certain  definite 
policy  in  dealing  with  them.  vXt  is  the  policy 
that  relies  wholly  on  competition  as  the  regu- 
lator of  prices  and  wages  and  as  the  general 
protector  of  the  interests  of  the  public.  It 
welcomes  centralization,  but  aims  to  destroy 
monopoly,  and  to  do  this  by  keeping  the  field 
open  to  all  independent  producers  who  may 
choose  to  enter  it.  By  this  plan  a  man  who 
builds  a  mill  and  puts  on  the  market  goods 
such  as  a  trust  is  making  must  take  all  the 
chances  that  fair  competition  entails ;  but  he 
will    be   shielded   from  certain  predatory  and 

V 

ivil41157 


Vi  PREFACE 

unfair  attacks,  in  which  size  gives  to  the  con- 
solidation a  decisive  advantage.  It  is  compe- 
tition, real  or  potential,  that  now  partially 
protects  the  public  and  makes  the  present  situ- 
ation endurable.  If  prices  are  raised  beyond 
a  certain  level,  new  mills  are  built;  and  a 
wholesome  respect  for  the  influence  of  these 
mills  acts  in  advance  of  their  existence  to 
hold  prices  in  check. )  It  is  possible,  as  this 
book  maintains,  to  give  greater  efficiency  to 
this  regulator.  If  this  is  thoroughly  done,  the 
menacing  corporations  will  become  servants  of 
the  public;  and  their  great  power  will  serve 
to  secure  for  America  cheap  production,  in- 
creased exportation,  and  commercial  and  finan- 
cial dominance  among  nations.  It  will  tend 
to  make  wages  rise,  to  increase  the  savings  of 
laborers  and  to  afford  an  enlarged  field  for 
the  investment  of  such  accumulations.  It  will 
tend  also  to  give  steadiness  to  the  movement 
of  business  and  to  diminish  the  violence  of 
commercial  crises.  In  the  view  that  is  here 
advanced,  political  democracy  depends  for  suc- 
cess largely  on  the  solution  of  industrial  prob- 
lems ;  and  a  condition  that  shall  create  many 
small  fortunes,  besides  a  few  gigantic  ones,  will 
produce  the  personal  material  of  which  a  demo- 
cratic state  needs  to  be  made.     The  demos  will 


PREFACE  vii 

then  not  be  an  empty-handed  and  hungry  pro- 
letariat, but  a  body  of  conservative  and  intelli- 
gent citizens. 

Even  the  argumentative  part  of  this  book  is 
brief,  and  aims  rather  to  call  attention  to  the 
plan  that  it  advocates  than  to  discuss  it  in  any 
exhaustive  way.  It  is  the  author's  belief  that 
circumstances  will,  in  any  case,  force  us  to 
adopt  a  line  of  policy  which  is  either  identical 
with  this  one  or  akin  to  it,  and  that  it  is  neces- 
sary only  to  win  public  attention  for  the  plan 
here  suggested,  in  order  that  costly  experiments 
and  more  costly  delays  may  be  avoided ;  for  it 
is  the  country  which  shall  early  get  the  benefits 
and  avoid  the  dangers  that  trusts  bring  with 
them  which  will  attain  a  place  of  leadership. 

The  book  is  composed  mainly  of  articles 
which  have  appeared  in  the  Political  Science 
Quarterly,  the  Atlantic  Monthly  and  the  Inde- 
pendent, These  articles  are  here  reprinted,  in 
whole  or  in  part,  with  only  such  amplification 
as  is  necessary  in  order  to  bring  them  into  a 
connected  series.  If  the  logical  sequence  is 
not  at  all  points  exactly  what  it  would  have 
been  if  the  book  had  been  written  de  novo,  the 
reader  may,  perhaps,  excuse  the  fact  in  view  of 
the  origin  of  the  work.  The  writer  desires  to 
express  his  thanks  to  the  editors  of  the  several 


viii  PREFACE 

periodicals  for  the  permission  which  they  have 
kindly  given  to  use  the  articles,  and  to  Mr. 
Arthur  M.  Day,  Instructor  in  Political  Econ- 
omy in  Columbia  University,  for  very  valuable 
aid  rendered  in  connection  with  the  revising 
of  the  proof. 

Columbia  University, 
New  York. 


CONTENTS 

CHAPTER   I 
The  People  and  the  Problem 

PAGE 

How  views  concerning  trusts  have  chianged.  The  neces- 
sity for  distinguishing  between  capital  as  such,  centrali- 
zation, and  monopoly.  The  possibility  of  securing 
centralization  without  monopoly,  and  the  outlook  that 
this  possibility  presents.  The  power  of  potential  com- 
petition, the  hindrances  that  interfere  with  the  perfect 
working  of  it,  and  the  possibility  of  removing  such 
hindrances i 

CHAPTER  n 

Early  Experiments  and  Present  Facts 

The  destruction  of  trusts  undertaken  in  ignorance  of  their 
nature  and  working;  the  expectation  that  they  will 
continue.  Their  menacing  actions.  Internal  weak- 
nesses and  the  effect  of  removing  them.  The  investor 
as  a  party  needing  protection.  Consumers  and  laborers 
as  partially  protected  by  potential  competition.  Three 
unfair  weapons  used  by  the  trusts  against  its  rivals  and 
the  possibility  of  taking  away  these  weapons        .         .       17 

CHAPTER   HI 

How  not  to  deal  with  Trusts 

Possible  measures  to  be  tested  by  a  rule  of  exclusion.  The 
total  abolition  of  many  protective  duties.  The  dread 
of  this   measure.      Reductions   of  duties   which    are 


CONTENTS 


called  for  without  reference  to  the  problem  of  trusts. 
The  reason  for  taking  independent  producers  into  coq,- 
sideration.  The  trust  as  a  possible  ally  in  the  effort 
to  reduce  duties.  The  limit  of  wise  reductions  and 
the  necessity  for  controlling  monopolies  as  a  means  of 
securing  them.  The  condition  in  which  manufacturing 
companies  will  favor  reciprocity  treaties.  The  limiting 
of  the  capital  of  trusts,  the  forcible  division  of  such 
corporations,  and  the  regulating  of  prices  by  law  all 
impracticable  and  undesirable 36 

CHAPTER  IV 

Monopolies  and  the  Law 

Investors  first  to  be  protected,  then  consumers,  laborers, 
and  farmers.  Independent  producers  the  protectors 
of  the  three  latter  classes.  The  need  of  regulating  the 
charges  of  railroads.  Three  predatory  actions  of  trusts 
and  the  difficulty  of  suppressing  them  by  statutes. 
The  greater  efficiency  of  the  common  law.  The  true 
test  of  a  monopoly  and  the  aid  which  statutes  may 
afford  in  the  applying  of  it.  Competition  now  re- 
pressed by  monopolistic  power ;  the  necessity  of  pre- 
cluding this  action  of  the  monopoly  by  means  of  the 
common  law  aided  by  statutes 56 

CHAPTER  V 

Conclusion 

Summary  of  the  policy  advocated.  The  results  to  be  hoped 
for:  predominance  in  international  commerce,  collec- 
tive prosperity,  harmony  among  classes,  and  industrial 
progress.  The  effect  on  progress  a  decisive  test  of  an 
economic  policy.  Gains  from  consolidation  not  per- 
verted into  monopoly,  contrasted  with  the  effects  of 
(i)  partial  monopoly  and  (2)  state  socialism       .        .      81 


THE    CONTROL   OF   TRUSTS 


THE   CONTROL  OF   TRUSTS 

CHAPTER   I 

THE  PEOPLE   AND  THE  PROBLEM 

American  industry  has  recently  gone  through 
a  rapid  and  startling  evolution.  Consolidations 
of  capital,  which  look  like  monopolies,  have 
come,  apparently  to  stay.  Just  as  we  were 
beginning  to  understand  an  economic  system 
in  which  competition  ruled,  the  system  trans- 
formed itself  into  one  which  is  seemingly 
based  on  the  repression  of  the  competitive 
process. 

The  feeling  of  the  people  concerning  this 
change  has  gone  through  two  distinct  phases. 
There  was  an  early  period  of  alarm,  as  the 
seeming  monopolies  developed.  This  was  fol- 
lowed by  a  period  of  reassurance,  as  the  fact 
appeared  that  some  influence  was  holding 
these  monopolies  in  check  and  that  they  could 
not  do  their  worst.     Perceiving  that  they  neither 


'    ^2'''     "  ""rriE'' CONTROL   OF   TRUSTS 

raised  prices  nor  depressed  wages  as  they  would 
have  done  if  their  mastery  of  the  situation  had 
been  secure  the  people  assumed  toward  them 
a  more  tolerant  attitude.  Since  then  views 
have  become  divergent  and  different  classes 
of  the  people  have  developed  unlike  opinions. 
The  so-called  trusts  have  a  few  pronounced 
friends  and  many  pronounced  enemies,  while 
in  the  background,  and  constituting  the  jury 
before  which  the  case  is  to  be  tried,  is  the 
undecided  majority  of  the  people.  By  their 
acts  the  trusts  are  furnishing  evidence  and 
are  revealing  their  real  nature;  and  they  must 
accept,  in  the  end,  the  verdict  which  the  public 
will  pronounce.  The  nation  will  have  its  way 
when  it  knows  what  it  wants. 

In  September,  1899,  there  was  held  in  Chi- 
cago a  conference  on  the  subject  of  trusts. 
The  members  of  it  represented  many  sections 
and  many  interests,  and  the  addresses  that 
were  delivered  may  be  taken  as  revealing  the 
position  of  the  American  people  on  the  ques- 
tion of  monopolies.  In  advance  of  the  fuller 
expression  of  the  popular  feeling  that  will 
ultimately  be  given,  this  conference,  perhaps, 


THE  PEOPLE  AND  THE  PROBLEM       3 

affords  the  best  means  of  perceiving  at  a 
glance  how  the  people  of  this  country  think 
and  feel,  and  how  they  will  probably  act,  in 
relation  to  those  vast  corporations  which  are 
acquiring  a  certain  monopolistic  power. 

The  most  encouraging  fact  that  has  come 
to  light  is  the  existence  of  a  limitless  amount 
of  moral  earnestness  —  a  feeling  of  antagonism 
to  real  monopoly  —  that  is  uniting  people, 
particularly  in  the  South  and  West,  in  a  cru- 
sade which  has  a  remote  resemblance  to  the 
anti-slavery  movement.  People  of  this  way  of 
thinking  and  feeling  do  not  usually  make  a 
deep  analysis  of  the  situation.  As  they  do  not 
fully  understand  the  commercial  evolution  that 
is  going  on  in  the  world,  they  are  likely,  in 
their  opposition  to  the  monopolistic  action  of 
trusts,  to  undervalue  their  productive  power. 
The  statutes  which  the  people  will  favor,  and 
will  perhaps  continue  to  enact,  will  be  sweeping 
prohibitions,  with  plentiful  penalties  attached 
to  them.  Mhey  will  be  laws  that  cannot  be 
enforced,  and  that  would  do  harm  if  they  were 
enforced.^  And  yet,  in  a  way,  what  this  section 
of   the   people  has   to   contribute    toward    the 


4  THE   CONTROL   OF  TRUSTS 

solution  of  the  trust  problem  is  worth  more 
than  is  anything  which  other  sections  can 
contribute.  A  zeal  that  is  not  according  to 
knowledge  now  will  be  pretty  certain  to  be 
according  to  it  before  the  struggle  is  over. 
It  will,  at  least,  begin  to  do  something ;  and 
if  what  it  does  proves  to  be  not  the  right 
thing,  it  will  do  something  else.  In  the  end 
it  will  solve  the  problem;  while,  on  the  other 
hand,  a  knowledge  that  is  not  backed  by  zeal 
will  do  nothing  either  at  the  outset  or  afterward. 

Fortunately,  not  all  of  the  zeal  is  confined 
to  the  South  and  the  West.  Agriculture  devel- 
ops the  most  powerful  opposition  to  trusts ;  but 
all  through  the  country  capital  that  is  not  massed 
in  colossal  holdings  is  opposed  to  them.  The 
country  as  a  whole  has  little  use  for  real  mo- 
nopoly, or  for  political  parties  that  entangle 
themselves  with  monopolies.  Success  in  elec- 
tions is  to  be  had  only  under  the  old  banner  of 
economic  freedom. 

There  are  two  small  classes  of  people  who 
are  predisposed  to  favor  trusts,  even  though 
they  shall  prove  to  be  real  monopolies.  These 
are,  first,  the  revolutionary  classes  —  socialists, 


THE  PEOPLE  AND  THE  PROBLEM      5 

anarchists,  communists  and  the  like ;  and,  sec- 
ondly, the  workmen  in  a  few  highly  organized 
trades,  who  have  some  inclination  to  favor  those 
trusts  which  will  exact  high  prices  from  the 
purchasing  public  and  share  with  their  work- 
men the  gains  thus  realized.  Experience  seems 
to  show  that  a  trust  which  has  real  monopo- 
listic power  may  form  an  alliance  with  its  work- 
men, or  with  important  classes  of  its  workmen, 
against  the  public.  In  that  case  the  laborers 
who  benefit  by  the  high  prices  thus  secured 
are  attached  to  the  trust,  though  it  is  by  a  con- 
ditional and  precarious  interest. 

What  is  the  attitude  of  the  great  body  of  the 
people  ?  Has  it  not  taken  any  decided  attitude  .f* 
Does  it  not  know  what  it  thinks  and  wishes  } 
In  so  far  as  the  details  of  law  making  are  con- 
cerned, it  certainly  does  not.  It  is  in  the  in- 
quirer's position ;  and  the  question  that  it  is 
hoping  to  have  answered  is  whether  it  should 
try  to  frame  statutes  that  will  crush  the  trusts 
or  should  content  itself  with  trying  to  regulate 
them,  or  even  with  letting  them  alone.  On  the 
more  fundamental  issue,  as  I  venture  to  affirm, 
the  mind  of  the  people  is  made  up.     There  is 


6  THE   CONTROL  OF   TRUSTS 

one  thing  that  it  wants  and  will  have ;  and 
there  is  another  thing  that  it  fears,  hates  and 
will  repress.  What  it  wants  is  productive  effi- 
ciency. The  people  will  have  capital  so  organ- 
ized that  it  can  compete  successfully  with  any 
capital  in  the  world.  What  they  will  not  have 
is  capital  so  endowed  with  special  and  abnormal 
powers  that  it  can  do  a  plundering  work,  as  well 
as  a  productive  one. 

There  are  certain  distinctions  which  the  people 
almost  never  make  with  sufficient  clearness; 
and  these  they  must  at  some  time  make,  if  their 
moral  earnestness  is,  in  a  practical  way,  to  be 
good  for  much.  There  are  three  things,  not  at 
all  identical,  which  the  people,  in  their  thought 
and  speech,  jumble  together,  and  even  attack 
without  any  discrimination.  They  are,  first, 
capitaL_as._such ;  secondly,  centralization  ;  and, 
-^thirdly,  monopoly.  When  a  general  attack  is 
pending,  the  word  that  is  used  to  cover  them 
all,  in  blanket  fashion,  is  "  monopoly."  When- 
ever the  anti-monopoly  movement  takes  the 
shape  of  an  assault  on  all  bondholders  or  stock- 
holders, it  is  clear  that  the  first  discrimination 
has  not  been  made ;  for  thus  capital,  as  such,  is 


THE  PEOPLE  AND  THE  PROBLEM       7 

confounded  with  capital  endowed  with  perni- 
cious powers. 

This,  fortunately,  was  not  the  attitude  of 
those  representatives  of  the  people  who  were 
recently  gathered  at  the  Chicago  conference, 
and  it  is  not  the  attitude  of  the  people  in  general. 
There  are  persons  who  have  a  quarrel  with 
bondholders  and  stockholders,  as  such,  because 
they  are  opposed  to  the  men  who  have  some- 
thing. They  are,  however,  in  a  very  small 
minority.  It  is  only  in  the  heat  of  a  contest 
that  an  attack  of  monopoly  becomes,  to  any 
important  extent,  an  actual  attack  on  capital. 

An  attack  on  monopoly  easily  becomes  an 
attack  on  centralization.  In  this  connection 
clear  discrimination  is  rare.  To  many  people 
the  massing  of  capital  seems  necessarily  to 
make  it  monopolistic.  If  it  does  this,  then 
there  is  no  distinction  in  fact  between  highly 
centralized  capital  and  monopoly.  We  cannot 
have  capital  in  very  big  masses  without  being 
"  in  the  grip  of  an  octopus  "  or  "  enslaved,"  as 
some  of  our  friends  from  the  West  and  South 
think  that  we  already  are. 

There  is  one  great  question  of  fact  pending: 


8  THE   CONTROL   OF   TRUSTS 

Does  centralization  carried  to  great  lengths 
necessarily  involve  monopoly  ?  If  so,  those  peo- 
ple are  perfectly  right  who  jumble  the  two 
together  and  attack  them  both  with  all  the 
energy  of  which  they  are  capable.  Monopoly 
is  unendurable.  If  we  cannot  exterminate  it 
or  reduce  it  to  harmless  dimensions,  we  shall 
begin  even  to  listen  to  the  seductions  of  the 
socialists.  We  shall  think  better  than  we  ever 
thought  before  of  the  plan  of  letting  the  trusts 
do  their  utmost,  to  the  end  that,  as  soon  as  a  vast 
network  of  them  shall  have  full  possession  of 
the  industrial  field,  we  shall  seize  their  entire 
capital  and  use  it  for  the  benefit  of  the  people. 

Is  this  the  only  alternative  ?  It  is  so  if  cen- 
tralization and  monopoly  are  practically  the 
same  thing,  and  if  the  centralizing  tendency 
cannot  be  stopped.  If  they  are  not  the  same, 
then  we  may  have  centralization  without  hav- 
ing monopoly.  We  may  get  the  good  that 
there  is  in  the  trust  and  cast  away  the  evil. 
We  may  save  all  the  productive  energy  that 
vast  capitals  ensure,  and  make  ourselves  victo- 
rious competitors  in  the  struggle  for  the  traffic 
of  the  world.      We  may  enable  ourselves  to 


THE  PEOPLE  AND  THE  PROBLEM      9 

undersell  every  one  else,  not  because  our  work-    \ 
men  will  take  low  wages,  but  because,  thanks      "" 
to  our  big  shops  and  our  automatic  machines,  \ 

they  produce  more  than  any  other  workmen. 
If  America  is,  as  it  seems  to  be,  the  natural 
home  of  the  trust,  and  if  we  can  draw  the  fangs 
of  the  monster  and  tame  him  to  good  uses,  we 
can  get  all  that  it  is  possible  to  get  out  of  mate- 
rial civilization.  We  can  be  commercially  dom- 
inant and  the  leaders  in  economic  progress. 
We  can  win  the  prizes  that  leadership  brings  / 
—  and  there  is  no  measuring  the  value  of  those 
prizes ;  for  wealth  honestly  gained  and  honestly 
dispersed  among  the  people  means  a  high  level 
of  life,  intellectual  and  moral,  as  well  as  physical. 
Momentous  beyond  the  power  of  language 
to  measure  is  the  question  whether  centraliza- 
tion may  be  allowed  to  go  to  the  utmost  lengths 
without  fastening  on  the  people  the  intolerable 
burden  of  monopoly.  Answer  this  question  in 
one  way,  and  you  will  probably  be  a  socialist; 
and  certainly  you  ought  to  be  one.  Answer  it 
in  another  way,  and  you  will  be  an  "  individual- 
ist," though  that  is  an  inexact  term  for  indicat- 
ing the  development  for  which  you  hope.    In  the 


lO  THE   CONTROL   OF   TRUSTS 

latter  case,  you  will  believe  in  freedom  of  indi- 
vidual action,  in  competition,  in  the  right  of  con- 
tract— in  short,  in  the  things  that  have  made  our 
civilization  what  it  is.  In  either  case,  you  will 
keep  your  optimism ;  for  you  will  be  sure  that, 
in  the  end,  we  shall  get  out  of  our  troubles  and 
dangers.  But  if  you  think  that  the  only  thing 
that  can  save  us  is  the  seizing  of  all  capi- 
tal by  the  state,  then  the  economic  millennium, 
the  vision  of  which  will  cheer  you  in  the  dark 
days  before  it  can  be  realized,  will  be  a  time  of 
fraternal  sharing  of  everything,  of  the  keeping 
of  a  common  purse  for  humanity  and  of  a 
forced  equality  that  will  leave  little  chance  for 
liberty.  If,  on  the  other  hand,  you  think  that 
competition  and  private  initiative  can  save  us, 
if  only  they  have  a  fair  trial,  what  you  will  see 
before  you  is  an  endless  era  of  progress  insured 
by  old  and  familiar  forces.  You  will  see  the 
wealth-creating  power  of  the  social  organism 
always  growing,  wages  always  rising,  wealth 
often  massed,  indeed,  in  great  corporate  capi- 
tals, but  also  divided,  in  its  ownership,  into  a 
myriad  of  holdings  scattered  widely  among  the 
people.    You  will  see  workers  acquiring  capital, 


THE   PEOPLE    AND   THE   PROBLEM  II 

while  still  earning  wages  in  the  mill ;  and,  as 
an  outcome  not  so  remote  as  a  Philistine  view 
would  make  it,  you  may  see  production  moving 
so  steadily  that  the  bonds  of  great  corporations, 
and  even  the  stocks,  may  become  common  and 
safe  forms  of  investment  of  workmen's  savings. 
You  will  see  them  used  so  freely  for  this  pur- 
pose that  the  old  and  sharp  line  of  demarcation 
between  the  capitalist  class  and  the  laboring 
class  will  be  blurred  and  at  many  points  obliter- 
ated. The  men  who  work  will  have  a  proprie- 
tary interest  in  the  tools  of  labor  and  a  share  in 
what  the  tools  produce.  The  socialist  is  not  the 
only  man  who  can  have  beatific  visions,  for  the 
picture  of  a  rnanly  development  for  the  laborer — 
of  a  perpetual  rise  in  wages  and  increase  in  sav- 
ings, in  home  owning,  in  personal  independence, 
and  in  culture  —  is  presented  to  every  one  who 
sees  what  competition  is  capable  of  doing.  Not, 
indeed,  without  very  intelligent  action  on  the 
part  of  the  government,  and  not  without  experi- 
menting and  waiting,  will  all  this  come.  But 
it  will  come  ultimately,  provided  only  that,  in 
spite  of  consolidations,  competition  shall  con- 
tinue to  work. 


^ 


12  THE   CONTROL  OF   TRUSTS 

The  practical  thing  to  be  decided,  therefore, 
is  what  a  state  can  do  to  open  the  rift  between 
centralization  and  monopoly  —  to  enable  the 
mills  to  produce  and  to  sell  as  cheaply  as 
the  biggest  establishments  can,  but  to  stop 
the  extortion  that  trusts  practise  and  ward 
off  the  greater  extortion  that  they  threaten 
to  practice. 

What  is  the  kind  of  legislation  that  a  gov- 
ernment needs  to  enact,  if  it  will  pluck  the 
flower  of  commercial  success  from  a  very 
thorny  and  dangerous  bush  ?  The  key  to 
the  solution  of  this  problem  is  afforded  by 
the  natural  forces  that  are  already  curbing  the 
great  corporations.  We  have  only  to  act  ac- 
cording to  nature.  We  must  do  what  a  skil- 
ful physician  does  when  he  wishes  his  patient 
to  get  well :  we  must  remove  the  obstructions 
that  prevent  nature  from  doing  its  healing 
work.  Great  corporations  would  never  be 
monopolies  if  competition  were  not  abnor- 
mally fettered  —  if  individual  action  had  a 
fair  field  and  no  favor. 

Certain  fundamental  facts  are  now  well 
known,  and  we  encounter  them  everywhere  in 


THE   PEOPLE   AND   THE   PROBLEM  13 

the  discussion  of  the  problem  of  trusts.  When 
prices  are  unduly  high,  owing  to  the  grasping 
policy  of  some  trust,  what  happens?  New 
competition  usually  appears  in  the  field.  Capi- 
tal is  seeking  outlets,  but  it  has  become  hard 
to  find  them.  Readily,  and  sometimes  almost 
recklessly,  does  it  build  new  mills  and  begins 
to  compete  with  trusts,  when  these  consoli- 
dated companies  do  not  know  enough  to 
proceed  on  a  conservative  plan.  Let  any 
combination  of  producers  raise  the  prices 
beyond  a  certain  limit,  and  it  will  encounter 
this  difficulty.  The  new  mills  that  will  spring 
into  existence  will  break  down  prices ;  and 
the  fear  of  these  new  mills,  without  their 
actual  coming,  is  often  enough  to  keep  prices 
from  rising  to  an  extortionate  height.  The 
mill  that  has  never  been  built  is  already  a 
power  in  the  market;  for  if  it  surely  will  be 
built  under  certain  conditions,  the  effect  of 
this  certainty  is  to  keep  prices  down. 

The  real  and  serious  difficulty  is  the  fact 
that  the  curbing  influence  of  this  latent  com- 
petition cannot  always  be  depended  on  to 
prevent    a    real    and    considerable    extortion. 


14  THE   CONTROL   OF  TRUSTS 

There  is  often  a  considerable  range  within 
which  trusts  can  raise  prices  without  calling 
potential  competition  into  positive  activity. 
The  possible  competitor  does  not,  by  any 
means,  become  a  real  one  as  promptly  as  he 
should.  The  trouble  is,  that  he  has  not  a 
fair  chance  for  his  life  when  he  actually  ap- 
pears on  the  scene.  He  is  in  very  great 
danger  of  being  crushed  by  the  trust,  by 
virtue  of  certain  abnormal  things  that  the 
trust  is  now  allowed  to  do.  If  the  great  com- 
pany could  not  do  these  abnormal  things,  the 
new  competitor  would  be  safe,  and  he  would 
appear  promptly  whenever  profits  should  be- 
come high  enough  to  call  for  him.  The  pos- 
sibility of  his  coming  would  hold  prices  at  a 
natural  level.  The  trust  would  benefit  the 
people  by  its  economies  and  would  not 
trouble  them  by  its  exactions. 

Potential  competition  is  certainly  a  real 
force.  Experience  has  proved  this  a  hundred 
times,  in  the  short  period  within  which  mod- 
ern trusts  have  existed.  It  is,  however,  a  force 
that  can  be  easily  obstructed.  Capital  is  pro- 
verbially timid;   yet   here  is  a  case  where  it 


THE   PEOPLE  AND   THE   PROBLEM  15 

has  to  be  bold,  if  it  is  to  do  what  the  pubHc 
needs  to  have  it  do.  Our  system  of  laws  now 
permits  overgrown  capitals  to  bully  small  ones. 
The  big  company  has  a  right  to  beat  the  little 
one  in  an  honest  race  for  cheapness  in  making 
and  selling  goods ;  but  it  has  no  right  to  foul 
its  competitor  and  disable  it  by  an  under- 
handed blow  —  and  this  is  exactly  what  great 
trusts  are  doing.  Where  a  state  needs  to  se- 
cure delicate  action  by  a  highly  sensitive 
agent,  its  clumsy  laws  and  clumsier  policing 
allow  that  agent  to  receive  rough  handling 
when  it  comes  into  the  field  or  to  be  so  terror- 
ized in  advance  that  it  often  does  not  come 
at  all. 

The  fact  is  that  a  trust  is  allowed  to  do 
things  which  are  out  of  harmony  with  the  spirit 
of  the  law  —  things  which  it  could  not  do  if  the 
law  were  accomplishing  even  the  single  task 
that  a  narrow  Spencerian  policy  demands  of 
it,  namely,  the  protection  of  property.  There 
are  actions  that  have  in  them  the  essence  of 
robbery,  though  they  lie  altogether  outside  of 
the  scope  of  statutes  heretofore  enacted.  It  is 
not  so  clear  that  they  are  outside  of  the  scope 


l6  THE    CONTROL   OF   TRUSTS 

of  common  law;  but  they  are  not  actually 
suppressed  by  it.  We  shall  see  what  these 
actions  are  and  what  policy  they  call  for. 
We  shall  see  how,  by  preventing  such  acts,  we 
can  make  the  trust  legitimate  and  safely  avail 
ourselves  of  its  vast  productive  power.  We 
can  use  insight  and  perceive  how  nature  is 
already  working.  We  can  try  the  right  experi- 
ment, and  try  it  early.  We  can  liberate  the 
competitive  forces  that,  even  now,  trammelled 
as  they  are,  make  our  state  a  tolerable  one, 
and  enable  them  to  develop  their  full  influence. 
The  monsters  that  alarm  us  are  tied  by  a  half 
visible  leash  that  we  did  not  consciously  put 
on  them ;  but  it  is  one  that  we  can  strengthen 
to  the  point  at  which  it  will  hold  and  tame 
them,  making  them  serve  us.  Success  in 
the  fierce  rivalries  into  which  nations  are  now 
entering  will  come  to  those  which  utilize,  for 
all  that  it  is  worth,  the  power  which  massed 
capital  gives,  without  surrendering  their  eco- 
nomic freedom. 


p  CHAPTER  II 

EARLY  EXPERIMENTS  AND  RECENT  FACTS 

This  country  is  the  especial  home  of  trusts 
in  their  highly  developed  form,  —  that,  namely, 
of  the  great  corporation  which  has  absorbed 
many  smaller  ones;  and  here,  therefore,  has 
been  experienced,  in  the  largest  degree,  the 
revolutionary  changes  which  their  presence  is 
making.  If  the  carboniferous  age  were  to 
return  and  the  earth  were  to  repeople  itself 
with  dinosaurs,  the  change  that  would  be  made 
in  animal  life  would  scarcely  seem  greater  than 
that  which  has  been  made  in  business  life  by 
these  monster-like  corporations.  Their  size 
is,  however,  one  of  the  few  things  about  them 
of  which  we  can  be  absolutely  sure.  Whether 
in  the  long  run  they  will  prove  to  be  benevo- 
lent or  malevolent  we  cannot  know  more  posi- 
tively than  we  can  know  whether  the  extinct 
saurians  were  gentle  or  fierce.  In  both  cases 
the  looks  imply  a  degree  of  fierceness.     But 

c  17 


l8  THE   CONTROL  OF   TRUSTS 

we  do  not  know  definitely  whether  the  trusts 
will  permanently  raise  prices  or  lower  them,  or 
whether  they  will  permanently  lower  wages  or 
raise  them.  We  do  not  know  whether  they 
will  in  the  end  impair  investments  or  make 
them  more  secure.  It  is  a  singular  fact  that, 
in  the  face  of  all  of  these  uncertainties  about 
the  character  of  trusts,  there  is  one  type  of  law 
which  the  people  of  many  states  have  been  able 
to  agree  upon,  and  that  is  the  kind  of  law  that 
aims  to  crush  them.  We  propose  to  extermi- 
nate the  monsters  on  uncertainties.  The  Mon- 
tana verdict,  that  a  man  deserved  hanging 
for  shooting  another  by  accident,  inasmuch  as 
"  in  such  matters  a  man  should  know  his  own 
mind,"  seems  to  be  applicable  here;  for  a 
country  should  know  its  own  mind  before 
destroying  an  institution. 

More  general  than  the  opinion  that  the 
trusts  ought  to  be  crushed  is  the  conviction 
that  they  will  not  down.  They  are  here  to 
stay,  and  we  know  it.  An  explanation  of 
the  light-hearted  way  in  which  we  put  upon 
the  statute  books  laws  that  aim  to  crush 
them  is  found  in  the  fact   that  such  laws  do 


EARLY  EXPERIMENTS   AND   RECENT  FACTS      19 

their  principal  work  before  they  are  enacted, 
when  they  are  nothing  but  planks  in  politi- 
cal platforms.  In  the  present  temper  of  the 
public  mind  severe  measures  are  at  least 
good  for  the  party,  that  promises  them ;  and, 
if  by  an  experiment  or  two  it  is  shown  that 
they  are  not  workable,  there  is  the  less  dan- 
ger in  continuing  to  enact  them  into  laws. 
In  general,  political  platforms  have  of  late 
required  prohibitive  statutes,  with  pains  and 
penalties  attached  to  them ;  and,  though  such 
statutes  have  frequently  been  enacted,  so  far 
as  large  results  are  concerned,  that  has  been 
the  end  of  it. 

Unless  we  can  "fool  all  of  the  people  all 
the  time,"  we  shall  be  forced  sooner  or  later 
to  change  this  policy;  for  the  people  will 
have  laws  that  not  only  sound  well,  but  work 
well.  In  order  to  obtain  them,  the  first  step  is 
to  get  a  more  thorough  knowledge  of  the  facts 
concerning  trusts  and  their  operations.  We  cer- 
tainly need  to  know  more  than  that  in  its  out- 
ward appearance,  a  trust  resembles  an  octopus. 

Not  baseless,  certainly,  are  the  accusations 
that  are  universally  brought  against  the  trusts 


20  THE   CONTROL   OF   TRUSTS 

for  their  conduct  toward  their  competitors. 
Often  enough  is  their  pohcy  predatory. 
They  do  not  Hterally  kill  men,  but  to  a  large 
extent  they  do  kill  competition.  They  often 
make  property  in  the  -shape  of  rival  plants 
very  insecure.  Indeed,  one  of  the  pressing 
questions  is,  whether  the  independent  pro- 
ducers who  have  been  crowded  out  of  the 
field  are  unfortunate  sufferers  from  natural 
progress,  or  whether  they  are  the  victims  of 
a  wrong  against  which  society  should  protect 
them.  Mere  centralization  means  a  crushing 
out  of  competitors  by  a  process  that,  however 
hard  it  is  for  them,  is  in  a  way  legitimate; 
for  it  is  an  incident  of  the  process  of  the  sur- 
vival of  the  fittest.  The  large  and  economi- 
cal establishment  survives,  and  society  gets  a 
benefit  from  the  fact.  But  centralization  that 
goes  to  the  length  of  quasi-monopoly  takes  a 
different  color,  for  it  may  exterminate  com- 
petitors in  ways  that  do  not  benefit  society. 
The  employers  who  are  forced  out  of  the 
field  are  not  then  vicariously  sacrificed  for 
the  good  of  the  public  as  a  whole.  On  the  con- 
trary, the  sacrifice  of  them  works  exceedingly  ill 


EARLY  EXPERIMENTS  AND  RECENT  FACTS   21 

for  the  public;  and  it  must  be  stopped,  if 
society  is  to  avoid  graver  evils  than  have  re- 
cently come  upon  it  from  any  economic  cause. 
How  much  power  does  great  size  give  to 
one  of  these  corporations?  Can  it,  if  it  will, 
have  the  market  practically  to  itself?  Can 
it  charge  what  it  will  for  its  goods?  Can  it 
shut  up  as  many  of  its  own  mills  and  dis- 
charge as  many  of  its  own  laborers  as  it 
pleases  ?  Is  there  anything  to  prevent  it 
from  acting  as  a  genuine  monopoly  ?  If 
there  is  not,  the  situation  will  soon  be  intol- 
erable, so  that  no  treatment  to  which  the 
state  may  be  forced  to  resort,  in  order  to 
rid  itself  of  the  trust,  will  be  unjustifiable. 

I 

There  are  two  important  facts  to  be  noted 
before  we  can  conclude  that  the  trusts  actu- 
ally have,  in  a  dangerous  degree,  the  power  of 
monopoly.  The  first  is  a  weakness  in  the 
organization  of  the  trusts  themselves,  and  the 
second  is  the  existence  of  a  powerful  restrain- 
ing force  in  their  environment.  Both  of  these 
serve  to  curtail  their  monopolistic  power.     It 


22  THE   CONTROL   OF  TRUSTS 

might  seem  that,  if  this  is  so,  the  internal 
weakness  of  the  trust  ought  to  be  fostered 
by  the  public  for  its  own  protection.  May 
we  not  say  that  whatever  weakens  our  enemy 
strengthens  us  ?  Should  not  a  policy  that 
would  make  the  trust  a  more  perfect  thing, 
in  its  internal  arrangements,  be  the  last  one 
to  be  adopted  ?  Curiously  enough,  this  is 
not  the  case.  We  can  even  help  to  protect 
the  public  by  insuring  to  the  trust  a  sounder 
organization.  Although,  as  competitors,  trusts 
are  now  somewhat  handicapped  by  internal 
weakness,  there  is  a  method  of  removing  that 
weakness  which  will  not  imperil  the  interests 
of  the  public,  but  will  contribute  in  a  certain 
positive  way  toward  protecting  them. 

I.  It  should  not  be  overlooked  that  at 
present  the  trust  is  a  very  imperfect  thing. 
It  is  composed  of  a  body  of  stockholders,  a 
few  of  whom  are  promoters  and  directors. 
Theoretically  all  of  its  proceedings  are  for 
the  benefit  of  the  stockholders.  If  this  were 
really  the  fact,  the  great  issue  would  lie 
between  the  trust,  as  a  whole,  and  the  public. 
As  it  is,  however,  there  is  a  more  immediate 


EARLY   EXPERIMENTS   AND   RECENT   FACTS     23 

and  pressing  issue  between  the  manipulators 
and  the  shareholders.  The  investor  is  at 
present  the  most  conspicuous  of  the  trusts' 
victims ;  and  measures  for  the  protection  of 
the  honest  and  innocent  investor,  whose 
money  is  filched  out  of  safe  places  into  these 
perilous  ones,  stand  first  in  the  order  of  time 
and  of  immediate  importance.  It  fortunately 
happens  that  the  very  things  which  will  pro- 
tect the  shareholder  will  injure  neither  the 
body  of  consumers  nor  the  excluded  laborers, 
but  will  contribute  toward  the  protection  of 
both  of  these  classes.  There  is,  therefore, 
complete  harmony  between  the  policy  that 
stands  guard  over  honest  capital  which  is 
lured  into  a  position  of  danger  and  the  policy 
that  protects  the  public  from  extortionate 
prices  and  workmen  from  enforced  idleness. 

The  condition  of  an  overgrown  trust  often 
resembles  that  of  the  wolf  in  the  Russian 
story.  As  the  members  of  a  pack  were  shot, 
one  at  a  time,  by  the  occupants  of  the  sleigh 
that  they  were  pursuing,  each  victim  was 
devoured  by  his  comrades ;  and  w^hen  the 
number   was    reduced    to    one,   this    survivor 


24  THE   CONTROL   OF   TRUSTS 

had  virtually  eaten  his  thirty-nine  mates.  It 
was  then  seen  that  he  wobbled  somewhat  in 
his  gait  and  no  longer  kept  up  with  the  sleigh. 
A  trust  that,  as  the  saying  goes,  has  "swal- 
lowed" thirty-nine  competitors  cannot,  in  the 
nature  of  the  case,  be  in  an  altogether  healthy 
condition,  for  its  power  of  digestion  and 
assimilation  is  not  unlimited.  Very  often  the 
management  of  such  a  trust  is  inferior  to  that 
of  the  corporations  which  were  absorbed  by 
it.  The  promoter's  purpose  is  attained  when, 
having  merely  formed  the  corporation,  he  gets 
his  slice  of  the  stock  and  realizes  on  it  in 
the  market.  He  may  have  neither  the  energy 
nor  the  skill  that  is  required  for  managing  the 
consolidated  company.  He  forms  the  com- 
bination and  leaves  it  to  its  own  devices  — 
and  often  they  are  bad  ones. 

If  this  were  all  that  the  stockholder  had 
to  fear,  his  case  would  be  better  than  it  is; 
but  unhappily  a  management  that  is  bad  for 
business  may  be  good  for  speculative  purposes. 
When  profit  cannot  be  secured  by  making 
goods  and  selling  them,  it  may  often  be  gained 
by  "  milking "  the  market  for  the  stock  or  by 


EARLY  EXPERIMENTS  AND  RECENT  FACTS  25 

wrecking  the  corporation,  ^^hat  the  investor 
needs  before  all  things  is  security.  He  wants 
to  have  the  trust  make  money  by  producing 
goods  and  selling  them  for  more  than  they 
cost.  But  the  manipulator  often  wants  some- 
thing so  distinct  from  this"  as  to  draw  a  sharp 
line  between  his  interests  and  all  legitimate 
interests.  It  follows,  therefore,  that  the  first 
thing  to  be  done  for  the  benefit  of  all  parties 
interested  is  to  clear  out  a  mass  of  iniquity 
within  the  organization ;  and  the  means  that 
promises  to  be  most  efficient  for  this  end  is 
publicity.  When  there  are  so  many  persons 
demanding  the  application  of  this  principle 
and  so  few  opposing  it,  there  is  little  doubt 
that  it  will  be  practicable  to  get  it.  The 
trusts  must  stand  the  turning  of  light  upon 
their  internal  affairs.  The  public  must  know 
what  plants  they  own,  what  they  gave  for 
them,  what  they  are  worth  at  present,  for 
how  much  they  can  be  duplicated,  what  appli- 
ances they  contain,  whether  antiquated  or 
modern  —  in  short,  what  is  the  substantial 
basis  for  the  value  of  the  stocks  and  bonds 
that  are  placed  on  the  market.     This  knowl- 


.i^ 


26  THE   CONTROL   OF   TRUSTS 

edge  is  at  present  inaccessible.  The  investor 
who  puts  money  into  the  trust  must  guess 
as  best  he  can  what  property  he  is  getting, 
and  the  guess  is  apt  to  be  a  bad  one  for  him. 
The  making  pubHc  of  such  business  facts  as 
have  just  been  specified  would  remove  the 
gravest  evils  from  stock  watering.  C  If  the  in- 
vestor could  know  that  there  was  only  one 
dollar  of  property  back  of  five  dollars  of  stocks 
and  bonds,  he  could  buy  the  securities  at 
a  discount  from  par  that  would  make  him  safe.^^ 

2.  In  the  minds  of  the  great  mass  of  the 
people,  however,  the  innocent  investor  is  not 
the  chief  subject  of  thought  or  care.  What 
the  public  chiefly  wishes  to  know  is  whether-the 
trusts  are  to  possess  and  use  monopolistic  pow- 
ers. Can  they  make  goods  dear  at  pleasure  ? 
Can  they  turn  off  bodies  of  workmen  and 
make  it  hard  for  them  to  get  new  places  ?  If 
they  are  genuine  monopolies,  they  can  do 
these  things ;  but  if  much  competition  sur- 
vives, they  cannot. 

As  has  been  said,  it  is  coming  to  be  gener- 
ally known  that  what  it  is  the  fashion  to  call 
"  potential  competition "  has   for   a  decade  or 


EARLY  EXPERIMENTS  AND  PRESENT  FACTS  2/ 

two  protected  the  public  against  really  monop- 
olistic extortions.  If  the  trusts  charge  too 
much  for  their  products,  new  mills  are  built 
and  prices  go  down.  Many  early  trusts  did 
this,  with  the  result  that  new  mills  were  built. 
These  facts  have  served  as  object  lessons  for  the 
managers  of  trusts.  While  they  have  to  some 
extent  put  up  prices,  they  have  usually  kept 
them  below  the  level  at  which  new  competi- 
tors would  be  called  into  the  field. 

It  is  commonly  supposed  that  mere  size 
gives  corporations  a  competing  advantage,  but 
this  an  inaccurate  supposition.  A  concern 
with  a  capital  of  twenty  million  dollars  can- 
not lose  a  million  a  year  any  more  safely  than 
one  with  a  capital  of  twenty  thousand  dollars 
can  lose  a  thousand  a  year.  If  the  losses  that 
a  corporation  sustains  by  cut-throat  competi- 
tion are  in  proportion  to  the  amount  of  its 
capital,  it  is  not  necessarily  a  dangerous  com- 
petitor. As  a  practical  fact,  a  new  mill, 
equipped  with  the  newest  and  best  machin- 
ery, is  often  a  stronger  competitor  than  a 
trust  which  is  encumbered  with  antiquated 
plants.     In   so   far   as  a   legitimate   rivalry  in 


28  THE   CONTROL  OF   TRUSTS 

cheap  production  is  concerned,  it  is  safe 
enough  to  build  a  new  mill  and  try  to  get  a 
share  of  patronage  for  it.  Wholly  intolerable 
would  be  our  present  condition,  if  this  were 
not  the  case.  As  it  is,  we  are  not  greatly 
conscious  of  being  under  an  oppressive  power. 
We  can  therefore  look  at  the  situation  with 
calmness  and,  before  deciding  upon  a  per- 
manent policy  with  regard  to  trusts,  we  can 
take  time  for  deliberation.  All  this  is  due  to 
the  fact  that  potential  competition  is  working 
powerfully  to  protect  us.  It  is  not  an  influ- 
ence of  our  own  devising;  it  has  set  itself  at 
work  with  no  thought  on  our  part;  but  it 
accomplishes  indefinitely  more  than  statutes 
have  ever  done.  If  it  worked  in  perfection, 
there  would  be  no  need,  in  this  connection,  of 
our  doing  anything.  We  might  protect  the 
investor  and  go  no  further. 

There  is  very  much  to  be  said  in  favor  of  a 
system  in  which  competition  of  the  old  type 
shall  have  ceased.  One  can  picture  to  him- 
self the  world  as  no  longer  filled  with  actual 
competitors  engaged  in  an  overt  struggle  with 
each  other.     One   can   imagine  a  department 


EARLY  EXPERIMENTS  AND  PRESENT  FACTS  29 

of  business  no  longer  represented  by  a  hun- 
dred mills  of  one  kind,  working  independently 
of  each  other  and  struggling  desperately  for 
patronage.  One  can  imagine  a  condition  in 
which  it  would  not  be  necessary  for  rival  pro- 
ducers to  pull  bewildered  purchasers  this  way 
and  that  by  the  eloquence  of  travelling  sales- 
men, by  the  enticing  statements  of  newspaper 
advertisements,  and  by  the  allurements  that  are 
offered  by  combined  art  and  eloquence,  as  these 
are  condensed  into  the  peculiar  decorations  with 
which  American  roadways  are  supplied.  (_^^ 
nearly  ideal  condition  would  be  that  in  which, 
in  every  department  of  industry,  there  should  be 
one  great  corporation,  working  without  friction 
and  with  enormous  economy,  and  compelled 
to  give  to  the  public  the  full  benefit  of  that 
economy,^  JThis  last  is  the  crucial  point;  for  it 
looks  far  easier  to  secure  the  monopoly  of  the 
field,  and  even  a  large  part  of  the  economy  that 
this  ought  to  insure,  than  to  secure  the  making 
over  to  the  public  of  the  benefits  that  accrue. 

It  happens,  fortunately,  that  the  degree  of 
publicity  which  will  protect  the  investor  will 
also  afford  a  certain  help   in  protecting   the 


30  THE   CONTROL   OF   TRUSTS 

consumer.  Among  the  things  that  the  public 
must  know  is  the  earning  capacity  of  the 
plants  that  the  trust  owns.  If  this  is  large, 
the  inducement  for  capital  to  enter  the  same 
field  is  proportionately  large.  It  is  clear,  how- 
ever, that  such  publicity  is  far  from  accom- 
plishing all  that  the  public  wishes  to  have 
accomplished.  It  is  conceivable  that  the  in- 
vestor may  be  made  safe,  while  the  competitor 
may  be  sacrificed,  so  that  the  consumer  and 
the  laborer  may  then  find  their  interests  in 
great  danger;  and  the  more  difficult  problem 
for  the  people  to  solve  is  the  one  which  they 
have  all  along  been  trying  to  solve  —  that  of 
protecting  these  latter  classes. 

II 

The  principle  of  monopoly  itself  is  not  peril- 
ous for  that  investor  whose  capital  is  in  the 
monopoly,  but  it  is  intolerable  for  every  one 
else.  It  is  safe  to  say  that  our  people  will 
ultimately  find  or  make  a  way  to  destroy  any 
genuine  monopolistic  power  that  is  in  private 
hands ;  and  it  is  nearly  safe  to  say  that,  if  we 


EARLY  EXPERIMENTS  AND  PRESENT  FACTS  31 

do  nothing  beyond  protecting  the  investor,  the 
trusts  will  acquire  too  much  of  this  power  and 
will  become  less  and  less  endurable.  The  re- 
strictions that  now  hold  them  in  check  are 
not  likely  of  themselves  to  grow  more  effective 
hereafter,  while  the  trusts  are  likely  to  grow 
much  stronger.  Monopoly  power  that  is  in- 
creasing and  restrictions  that  are  diminishing 
in  force  point  to  a  time  when  something  posi- 
tive will  certainly  have  to  be  done  in  defence 
of  property  rights,  if  not  of  personal  liberty. 
The  measures  that  it  is  possible  to  take  are 
not  many,  but  we  shall  soon  see  what  they  are 
and  try  to  make  a  selection  from  among  them. 
Even  now  we  can  discern  the  principle  which 
must  dominate  a  sound  policy  in  dealing  with 
trusts.  That  principle  is,  first  of  all,  to  keep 
competition  alive.  Proper  regulation  will  not 
shield  an  independent  producer  from  any  legit- 
imate rivalry,  though  it  will  protect  him  from 
what  is  not  real  rivalry,  but  a  disabling  policy 
on  the  part  of  the  big  competitor. 

Many  a  trust  would  now  find  itself  in  a  new 
and  strange  position,  if  it  had  no  power  to 
keep   down   rivals   save    by   fair   competition; 


32  THE   CONTROL   OF   TRUSTS 

and  recent  experience  seems  to  show  that,  up 
to  the  present  time,  goods  are  often  produced 
with  greatest  economy,  not  in  shops  that  are 
owned  by  the  trusts,  but  in  those  which  are 
owned  by  alert  and  enterprising  competitors. 
If  such  producers  are  Hable  to  be  crushed,  in 
spite  of  the  economy  with  which  they  work, 
the  public  will  suffer  an  injury  that  is  far  more 
serious  than  any  which  the  trusts  have  thus 
far  brought  about.  If  it  shall  be  established 
that  economy  of  production,  or  legitimate  com- 
peting power,  affords  no  protection  to  an  inde- 
pendent producer,  a  blight  will  be  put  upon 
the  progress  of  inventions ;  for  monopoly  itself 
does  not  greatly  encourage  invention,  and  the 
would-be  competitor  of  the  monopoly,  who 
would  gladly  introduce  economical  devices, 
will  find  the  effort  to  enter  the  field  at  all 
very  perilous.  The  brilliant  series  of  indus- 
trial improvements  that  have  been  steadily 
raising  the  level  of  human  life  and  have 
opened  an  inspiring  vista  to  those  who  look 
into  the  future  may  not  thus  be  brought 
wholly  to  an  end,  but  it  will  continue  under 
serious  difficulties  and  with  comparatively 
small  results. 


EARLY  EXPERIMENTS  AND  PRESENT  FACTS  33 

The  power  of  trusts  to  crush  competitors  is 
dependent  upon  three  kinds  of  unfair  dealing. 
The  first  is  local  discrimination  in  prices. 
The  trust  may  sell  goods  for  less  than  cost 
in  a  limited  section  of  the  country,  where  an 
independent  producer  is  operating,  while  it 
sustains  itself  by  charging  high  prices  in  the 
large  remaining  area.  Even  though  the  com- 
petitor may  greatly  excel  the  trust  in  the  econ- 
omy with  which  he  makes  goods,  he  may  be 
forced  out  of  the  business  by  this  predatory 
policy.  A  producer,  who  found  himself  in  this 
position,  once  called  on  the  manager  of  the 
trust  that  was  driving  him  to  the  wall  and 
was  received  with  a  brusque  admonition  that 
he  had  "  better  get  out  of  the  business."  "  But 
do  you  not  see,"  said  the  independent  pro- 
ducer, "that,  in  my  territory,  I  can  produce 
more  cheaply  than  you  can  ? "  "  Do  you  not 
see,"  was  the  reply,  "  that,  if  we  lose  money  in 
the  twenty  cities  where  you  are  operating,  and 
make  money  in  the  two  hundred  other  cities 
where  we  are  operating,  we  come  out  ahead  ? " 
Such  local  discrimination  is  a  strategic  meas- 
ure that  is  often  irresistible. 


34  THE   CONTROL   OF   TRUSTS 

Again,  discriminations  may  be  made,  not 
between  different  localities,  but  between  differ- 
ent grades  of  goods  on  the  general  price  scale. 
The  trust  may  make  many  varieties  of  one 
general  kind  of  merchandise,  while  the  com- 
petitor may  make  only  one.  In  that  case, 
even  though  he  may  operate  in  many  sections 
of  the  country,  the  trust  may  pursue  and  de- 
stroy him.  It  may  reduce  the  price  of  his 
type  of  goods  below  cost,  while  keeping  all 
other  prices  at  the  original  high  level. 

Thirdly,  the  trust  may  refuse  to  sell  goods 
at  all  under  certain  conditions.  It  may  boy- 
cott merchants  who  do  not  comply  with  its 
regulations ;  and  one  of  its  requirements  may 
be  that  the  merchants  in  turn  shall  boycott 
all  independent  producers.  This  is  the  basis 
of  the  "factors'  agreement,"  whereby  a  trust 
which,  within  the  wide  variety  of  its  products, 
has  a  number  of  things  that  are  essential  for 
a  merchant's  business,  either  refuses  to  sell  him 
anything  or  refuses  to  give  him  necessary  dis- 
counts, if  the  merchant  buys  goods  of  any 
description  from  a  competing  establishment. 

Can  these  three  practices  be  suppressed  by 


EARLY  EXPERIMENTS  AND  PRESENT  FACTS  35 

law?  Off-hand  answers  to  this  question  are 
often  in  the  negative  ;  and  certainly  there  is 
no  blinking  the  difficulty  of  this  undertaking. 
If  a  law  could  be  made  and  enforced,  compel- 
ling the  trusts  to  treat  all  customers  alike, 
local  discriminations  would,  of  course,  have  to 
end  ;  but  the  enforcement  of  such  a  require- 
ment would  encounter  difficulties.  The  most 
obvious  of  these  arises  from  the  fact  that  mer- 
chandise is  not,  like  refined  gold,  of  uniform 
quality  and  readily  cognizable.  Hence,  the 
trust  might  manufacture  a  certain  grade  of 
goods  and  offer  it  solely  in  one  state,  for  the 
purpose  of  crushing  out  competition  showing 
itself  there.  It  would  thus  be  possible  to 
claim  that  it  was  making  no  discrimination 
in  charges,  since  whatever  was  offered  else- 
where was  offered  at  the  same  price  in  this 
state  also.  But  as  soon  as  the  vital  necessity 
for  keeping  home  competition  alive,  in  spite 
of  consolidations,  is  fully  appreciated  by  the 
public,  it  will  be  practicable  to  secure  serious 
consideration  of  a  plan  of  action  which,  if  it 
were  successful,  would  accomplish  this. 


CHAPTER  III 

HOW  NOT  TO  DEAL  WITH  TRUSTS 

Of  the  measures  which  it  is  possible  to  take 
in  connection  with  trusts,  some  have  only  to 
be  stated  to  be  rejected;  and  these  it  is  not 
worth  while  to  discuss.  Other  measures, 
however,  do  not  carry  their  condemnation  on 
their  face.  Each  of  these  has  some  support 
from  reasonable  people;  and  within  this  list 
of  expedients  it  is  well  to  apply,  if  we  can,  a 
rule  of  exclusion.  Even  of  these,  some  will 
almost  certainly  not  be  adopted,  and  by  elimi- 
nating them  we  can  save  our  thought  and 
effort  for  policies  that  have  more  in  their 
favor. 

At  the  risk  of  disagreeing  with  many  per- 
sons for  whose  general  views  I  have  sympa- 
thy, I  venture  to  say  that  one  of  the  things  we 
shall  not  do  is  to  make  a  sweeping  abolition 
of  protective  duties.  It  would  be  necessary 
to  remove  these  duties  in  a  wholesale  way  in 

36 


HOW  NOT  TO  DEAL  WITH  TRUSTS     37 

order  fully  to  accomplish  the  purposes  of  the 
measure.  To  expose  a  few  trusts  to  the  full 
force  of  foreign  competition  and  to  continue  to 
protect  others  would  be  so  far  from  a  solution 
of  the  problem  that  the  gain  which  could  thus 
be  made  would  scarcely  be  worth  much  risk 
and  trouble.  Totally  to  abolish  very  many 
duties  would  seem  to  the  people  like  taking 
a  hazardous  leap  into  a  gulf  of  uncertainties. 
And  then,  if  it  should  turn  out  that  some  of 
the  duties  sustained  not  merely  the  trusts,  but 
the  industries  themselves  —  if,  after  the  abo- 
lition of  the  duties,  the  making  of  many  articles 
were  to  become  comparatively  unprofitable,  a 
very  costly  reconstruction  of  our  system  of 
industry  would  have  to  be  made.  Whatever 
may  be  said  about  the  wisdom  of  having  tariffs 
at  all,  a  country  which  actually  has  one  and 
which  under  it  has  built  up  industries  that  are 
still  in  some  degree  dependent  on  it  will  be 
cautious  in  abolishing  it. 

This,  however,  is  far  from  denying  that  large 
changes  in  our  system  of  import  duties  are 
practicable  and  desirable.  The  question  is: 
On  what  principle  shall  the  changes  be  made? 


38  THE  CONTROL  OF  TRUSTS 

Undoubtedly  we  shall  modify  our  tariff,  to 
make  it  less  irrationally  protective.  We  shall 
become  weary  of  paying  more  for  our  manu- 
factured products  than  Europeans  pay  for 
them.  The  trusts  themselves  will  wish  to 
enter  foreign  markets  that  are  now  closed  by 
retaliatory  duties,  and  they  will  look  with  fa- 
vor on  reciprocity  treaties.  They  will  find 
that,  in  the  main,  exports  are  paid  for  by  im- 
ports; and  that  where  importations  are  now 
cut  off  by  the  American  tariff,  exportations 
are  limited  to  small  dimensions.  We  cannot, 
of  course,  send  away  our  goods  forever  in  ex- 
change for  securities.  If  we  sell  goods,  we 
must  buy  goods ;  and  this  fact  may  mean  the 
lopping  off  now  of  one  and  now  of  another 
feature  of  the  protective  system. 

There  is  a  scientific  way  of  dealing  with 
import  duties ;  and  we  cannot  expect  to  find 
it  and  adopt  it  unless  we  make  sure,  at  the 
outset,  of  the  true  relation  of  the  tariff  to  the 
problem  of  monopoly.  Duties  do  something 
for  the  trust  that  exists  within  an  industry ;  but 
they  also  do  something  for  the  independent 
producers  who,  with  the   trust,  constitute   the 


HOW   NOT   TO   DEAL  WITH   TRUSTS  39 

industrial  group  as  a  whole.  They  likewise 
affect  the  potential  producer,  or  the  man  who 
is  not  now  in  the  field  but  will  be  there  if  cer- 
tain inducements  are  offered.  The  solution 
of  the  tariff  problem  is  bound  up  with  the 
true  solution  of  the  problem  of  dealing  with 
monopolistic  corporations. 

The  essential  principles  in  this  connection 
may  be  stated  as  follows:  — 

1.  Wherever  there  is  a  trust,  there  is  an 
independent  producer  also  to  be  considered. 
If  he  is  not  now  in  the  field,  he  stands  ready 
to  enter  it  when  a  return  is  to  be  had. 

2.  This  independent  producer  should  at 
all  hazards  be  protected,  not  against  any  fair 
competition,  but  against  unfair  and  preda- 
tory attacks  by  his  powerful  rival. 

3.  If  he  is  thus  protected,  his  presence  or 
even  a  contingent  prospect  of  his  arrival  on 
the  scene  protects  the  public  against  extortion. 

4.  When  the  public  is  thus  protected  in  a 
way  that  is  not  dependent  on  changes  in  the 
tariff,    this  fact  makes   it   practicable  to  make 

•  such   changes    in    the   wisest   way. 

5.  The   alterations    that,   under   these    con- 


40  THE   CONTROL   OF  TRUSTS 

ditions  are  desirable  are  unlike  those  which 
would  be  made  if  the  purpose  in  view  were 
merely  the  crippling  of  the  monopoly.  They 
are  more  nearly  like  those  which  might  well 
be  made  if  there  were  no  trusts  in  existence. 

6.  If  competition  is  thus  kept  alive,  the  trust 
can  afford  to  permit  a  reduction  of  the  duties 
on  its  own  products,  and  it  is  interested  in 
demanding  reductions  of  the  duties  on  many 
other  things. 

7.  If  such  reductions  were  made,  the  trust 
would  find  itself  less  strongly  impelled  than  it 
now  is  to  act  a  predatory  part  in  crushing  its 
independent  rivals. 

The  truth  of  these  propositions  will  appear 
as  the  argument  proceeds.  What  they  signify 
is  that  it  is  of  vital  importance  to  keep  competi- 
tion alive,  if  we  are  to  deal  in  a  right  way  with 
our  protective  system,  and  that  proper  regu- 
lation of  protection  will,  in  turn,  help  us  to 
keep  competition  alive.  In  other  words,  if  we 
solve  the  problem  of  monopoly  without  chang- 
ing the  tariff,  we  shall  get  help  from  the  trusts 
themselves  when  we  seek  to  make  changes. 
These   changes   will  then  have  a  further  and 


HOW   NOT   TO   DEAL  WITH   TRUSTS  41 

advantageous  reaction,  which  will  confirm  and 
increase  the  gain  that  we  shall  have  secured 
by  our  original  anti-monopoly  action.  Control 
the  trusts,  then,  and  take  the  monopolistic 
element  out  of  them.  This  will  help  you  to 
reform  the  tariff,  and  this,  in  turn,  will  make  the 
control  of  the  trusts  more  easy  and  complete. 

What,  now,  are  the  essential  facts?  The 
country  is  full  of  great  corporations  which  have 
some  genuinely  monopolistic  power.  They  are 
sheltered  by  a  tariff  that  enables  them  to  put 
on  American  consumers  the  "  fixed  charges " 
of  their  business,  and  thus  to  sell  goods  to 
foreigners  more  cheaply  than  they  sell  them 
at  home.  These  companies  virtually  collect 
from  their  customers  in  this  country  a  subsidy 
for  the  maintenance  of  an  export  trade.  In- 
evitably the  demand  is  made  that  all  duties 
which  enable  them  to  do  this  shall  be  re- 
pealed. If  this  demand  were  complied  with, 
v/e  should  find  ourselves  without  protection 
for  a  great  variety  of  manufactured  articles, 
but  with  protection  for  raw  materials.  The 
change  would  be  a  kind  of  tariff  reform  that 
would  be  most  likely  to  injure,  not  merely  the 


42  THE   CONTROL   OF   TRUSTS 

trusts,  as  menacing  powers  within  their  several 
industries,  but  the  industries  themselves. 

It  would  affect  the  independent  producer 
as  well  as  the  trust;  and  it  could  be  brought 
about  only  by  a  struggle  of  classes  in  which 
this  independent  producer,  who  is  the  natural 
friend  and  protector  of  the  public,  would  be 
on  the  side  of  the  combination  and  against 
the  reformers.  Success  in  the  movement 
would  mean  that  a  crude  force  had  overborne 
monopolist  and  free  competitor  alike. 

Carry  this  struggle  through  to  success. 
Abolish  all  duties  on  trust-made  articles  and 
see  where  that  will  leave  the  country.  In  a 
few  cases  you  will  produce  no  evil  effects. 
Some  branches  of  manufacturing  have  un- 
doubtedly reached  a  stage  in  which  it  costs 
less  to  make  goods  in  this  country  than  in 
Europe;  and  in  these  industries,  with  no  pro- 
tection, the  American  makers  can  hold  their 
markets  against  foreigners,  while  still  get- 
ting fair  returns.  No  foreign  competition  can 
force  such  producers  to  reduce  prices  to  the 
profit-annihilating  point.  This,  moreover,  is 
the  situation,  not   of   exceptional    and    highly 


HOW   NOT  TO   DEAL  WITH   TRUSTS  43 

favored  manufacturers,  but  of  the  majority  in 
some  trades.  Does  any  one  suppose  that  the 
production  of  steel,  for  instance,  would  be 
much  reduced,  if  that  product  were  made  duty 
free  ? 

From  this  condition  of  fortunate  indepen- 
dence industries  shade  off  into  a  state  of  partial 
dependence  on  protective  duties.  In  some 
branches  the  most  efficient  shops  could  hold 
their  own  against  foreigners;  while  others, 
being  less  efficient,  would  have  to  yield  the 
field  to  them.  In  very  few  cases  would  all 
the  estabHshments  be  crushed;  but  in  many 
cases  there  would  be  a  great  mortality  among 
them.  The  shop  that  is  now  fighting  its  way 
toward  success  might  find  its  career  abruptly 
stopped.  Possibilities  of  this  kind  are  clearly 
enough  before  the  public  mind  to  prevent  the 
abolition  of  all  protection  on  all  articles  made 
by  trusts.  Wholesale  removal  of  duties  has 
some  intelligent  advocates,  but  it  has  practi- 
cally no  chance  of  success. 

It  would,  however,  be  entirely  reasonable  to 
reduce  each  duty  to  an  amount  that  equals  the 
difference  in  cost  between  the  American  and 


44  THE   CONTROL   OF   TRUSTS 

the  foreign  article.  Find  out  accurately  how 
much  the  owner  of  an  American  mill  has  to 
spend  in  the  creating  of  a  particular  product, 
ascertain  with  the  same  accuracy  how  much 
the  European  spends  for  the  same  purpose, 
and  make  the  duty  on  the  completed  article 
equal  to  the  difference  between  the  two  sums. 
The  European  can  then  place  his  goods  on 
the  American  market  at  an  outlay  which,  when 
duties  are  paid,  equals  the  outlay  incurred  by 
his  American  rival.  The  two  will  then  be 
more  nearly  on  an  equal  footing,  and  suc- 
cess will  come  to  the  one  who  improves  his 
processes  most  rapidly  and  makes  the  largest 
savings  in  the  advertising  and  selling  of  his 
wares.  The  public  will  get  the  benefit  of  this 
rivalry  in  economical  production,  and  will  get 
its  goods  at  the  maximum  of  cheapness.  The 
adjustment  will,  moreover,  favor  the  American 
maker;  for,  if  the  costs  of  production  on  the 
two  sides  of  the  Atlantic  decline  together,  the 
difference  between  the  costs  will  grow  less.  It 
will  soon  be  smaller  than  the  amount  of  the 
duty;  and  if  then  the  goods  are  sold  at  their 
cost  to  one  who  imports  them  from  abroad, 


HOW   NOT   TO   DEAL   WITH   TRUSTS  45 

there  will  be  a  margin  of  gain  for  the  man  who 
makes  them  here. 

Even  at  the  beginning  it  is  necessary  to 
allow  such  a  margin  of  profit  to  be  made  by 
every  highly  efficient  producer.  The  costs 
in  America  and  in  Europe  cannot  be  ascer- 
tained with  perfect  exactness ;  and  if  the  duty 
is  intended  surely  to  cover  the  difference  be- 
tween them,  it  must  be  fixed  at  a  slightly  larger 
figure  than  the  one  that  expresses  the  apparent 
difference.  Moreover,  costs  vary  in  different 
shops ;  and  in  practice  the  most  economical 
one  in  this  country  would  not  be  made  to  fur- 
nish the  standard  for  comparison.  To  do  that 
might  sacrifice  a  less  efficient  man.  But  if  this 
latter  producer  is  hopelessly  outdone  in  the 
race  for  cheapness,  he  should  be  thus  sacri- 
ficed, since  in  the  end  he  is  certain  to  fail. 
It  is  far  from  being  for  the  public  good  to  tax 
consumers  for  the  support  of  an  establishment 
that  will  run  forever  in  a  wasteful  way.  The 
only  establishment  that  is  entitled  to  consider- 
ation is  the  one  which  has  before  it  the  pros- 
pect of  increasing  success,  but  has  not  yet 
attained  it  —  the  one  which  is  well  equipped, 


46  THE   CONTROL   OF   TRUSTS 

but  has  not,  as  yet,  won  a  market  for  its  goods. 
Possibly  its  internal  organization  is  tentative 
and  imperfect,  but  has  large  possibilities  of  im- 
provement. Many  a  new  establishment  goes 
through  a  period  in  which  experimenting  is 
inevitable  and  is  costly ;  and  that  potential  pro- 
ducer, to  whom  we  have  before  referred  as  the 
agent  whose  possible  action  puts  a  curb  on  the 
exactions  of  the  trust,  has  before  him,  whenever 
he  plans  to  enter  the  field  as  an  actual  com- 
petitor, the  prospect  of  facing  such  initial 
difficulties.  An  adjustment  that  takes  the 
potential  competitor  into  consideration  will  be 
apt  to  leave  enough  of  the  present  duty  on  his 
product  to  cover  the  difference,  not  merely 
between  the  costs  that  he  will  incur  when  his 
efficiency  shall  be  fully  developed  and  those  in- 
curred by  a  European  rival,  but  the  difference 
between  his  earlier  and  slightly  larger  outlay 
and  the  European  standard.  On  all  accounts 
the  calculation  of  the  present  excess  of  costs 
incurred  by  Americans  over  those  incurred  by 
foreigners  needs  to  be  made  on  a  more  or  less 
liberal  scale.  Without  retaining  the  absurd 
duties  that  now  protect  the  American,  a  policy 


HOW  NOT   TO   DEAL   WITH   TRUSTS  47 

which  takes  the  situation  as  we  now  find  it, 
and  tries  to  change  it  in  a  reasonable  way, 
will  leave  enough  of  the  duty  untouched  to 
protect  the  establishments  which  are  now  run- 
ning with  a  good  degree  of  economy,  though 
they  fall  short  of  attaining  the  maximum  of  it. 
This  policy  would  be  a  desirable  one,  if  there 
were  no  trusts  in  existence ;  and  it  may  be 
even  more  desirable,  in  view  of  the  growth  of 
these  monopolistic  companies.  The  chance  of 
actually  carrying  out  this  policy  depends  on  the 
regulating  of  trusts  by  a  different  set  of  meas- 
ures. We  must  take  away  their  power  to 
make,  even  under  an  exorbitant  duty,  any  ex- 
orbitant profits.  When  that  is  done,  they  may 
submit  to  a  large  reduction  of  duties  on  their 
own  goods;  and  they  will  be  morally  sure  to 
join  us  in  demanding  reductions  of  duties  on 
products  which  they  do  not  make.    ..__-^- — — 


After  a  long  period,  during  which  very  little 
tariff  reform  of  any  kind  has  been  obtainable, 
we  find  ourselves  where  two  contrasted  types 
of  it  present  themselves  as  possibilities.  There 
is,  first,  the  abolition  of  the  duties  on  finished 
goods    and    the    retention    of    those    on    raw 


48  THE   CONTROL   OF   TRUSTS 

materials.  This  is  simply  an  anti-monopoly 
measure,  which  takes  grave  risks  for  the  sake 
of  curbing  the  power  of  great  corporations. 
There  is,  again,  the  policy  of  reciprocity,  which 
admits,  with  low  duties  or  none  at  all,  many 
products  of  foreign  countries,  for  the  sake  of 
making  markets  for  our  own  exportable  goods. 
This  plan  might  help  the  very  industries 
within  which  trusts  have  been  formed.  It 
would  certainly  insure  a  sound  commercial 
expansion.  Will  the  trusts  themselves  favor 
it  ?  Will  the  general  public  do  so  ?  If  mo- 
nopolies can  be  curbed  without  changes  in  the 
tariff,  the  answer  to  both  of  these  questions  is, 
Yes ;  if  not,  the  answer  in  both  cases  is,  No. 

If  a  corporation  can  exact  a  really  monopo- 
listic price  for  goods  that  it  sells  at  home,  it 
may,  however,  treat  its  export  business  as  of 
secondary  consequence.  It  may  prefer  to  ac- 
cept reduced  orders  from  abroad,  rather  than 
accept  lower  prices  for  the  goods  sold  at 
home.  There  may  be  larger  gains  to  be  had 
from  high  prices  in  the  home  trade  than  from 
any  practicable  expansion  of  the  volume  of  the 
foreign  trade.     The  trust  will  then  oppose  any 


HOW   NOT  TO   DEAL   WITH   TRUSTS  49 

reduction  of  the  duties  that  enable  it  to  main- 
tain the  unnaturally  high  prices. 

What  will  it  do  if,  in  ways  that  are  indepen- 
dent of  the  tariff,  its  monopolistic  power  is 
broken  ?  If  competition  still  acts  at  home  and 
brings  prices  to  their  normal  level,  will  the  mo- 
tive for  fighting  against  the  reduction  of  duties 
still  exist?  On  the  contrary,  a  sound  policy 
will  favor  a  reduction  of  them.  The  monopoly 
profits  on  the  sales  made  at  home  will  be  defi- 
nitely lost,  and  the  foreign  markets  will  then  be- 
come of  great  importance.  A  policy  that  will 
gain  admission  to  them  for  the  goods  that  are 
coming  in  such  abundance  from  our  own  mills 
will  be  lucrative.  Gains  will  come  from  large 
sales  at  natural  prices,  rather  than  from  small 
sales  at  unnatural  ones.  This  means  that  the 
trusts  will  be  enlisted  on  the  side  of  commer- 
cial reciprocity,  and  will  tolerate  a  reduction  of 
duties  on  such  products  as  they  make  them- 
selves, if  foreigners  will  make  similar  conces- 
sions and  if  the  American  producers  of  raw 
materials  will  do  likewise.  Our  manufacturers 
may  not  wish  to  meet  foreign  competition  ;  but 
this  does  not  prove  that  under  favorable  condi- 


50  THE   CONTROL   OF   TRUSTS 

tions  they  cannot  do  it,  even  without  protection. 
They  can  certainly  do  it  with  the  aid  of  the 
limited  protection  that  has  been  described 
above ;  and  this  certainty  is  made  doubly  sure 
by  the  advent  of  new  and  vigorous  rivals  at 
home.  Inventions  will  be  made  and  organiza- 
tion will  be  perfected,  till  the  foreigner  can  be 
safely  met  on  his  own  territory.  With  the 
prices  of  their  own  goods  reduced  by  competi- 
tion to  a  natural  level,  they  can  hold  the  home 
market  in  spite  of  all  comers.  Low  duties 
on  raw  materials  and  efficient  competition  in 
our  own  country  will  afford  advantageous 
conditions. 

Among  the  possibilities  of  the  near  future  is 
a  status  in  which  trusts  shall  be  displaced  from 
their  vantage  ground  of  monopoly  and  the 
prices  of  their  goods  shall  be  brought  to  a  nat- 
ural level.  They  will  then  be  safe  against  for- 
eign rivalry  and  anxious  for  foreign  outlets. 
They  will  desire  reductions  of  duties,  if  only 
these  can  be  made  in  the  case  of  raw  materials 
as  well  as  in  that  of  finished  products.  So 
long  as  the  trusts  continue  to  be  quasi-monopo- 
lies,  they  may  contest   every  foot  of  progress 


HOW   NOT   TO   DEAL   WITH   TRUSTS  51 

toward  freer  trade  ;  but  if  they  lose  the  monop- 
oHstlc  position,  they  will  use  their  vast  power 
in  promoting  it. 

Of  the  utmost  importance,  then,  is  the  rescu- 
ing of  competition  from  extinction;  for  not  only 
does  this  afford  the  key  to  success  in  solving 
problems  of  commercial  expansion,  but  it  cre- 
ates the  conditions  for  healthy  progress  in  all 
the  practical  arts.  Inventions  will  follow  each 
other  in  bewildering  succession,  forces  of  nature 
will  be  pressed  into  service  in  enlarging  meas- 
ure and  the  earning  power  of  labor  will  go 
steadily  upward,  provided  only  that  an  effective 
competition  shall  be  kept  alive.  On  the  farm- 
ers, in  particular,  does  the  pressure  of  a  monop- 
olistic power,  when  it  exists  at  all,  rest  heavily, 
and  the  rescuing  of  competition  in  manufac- 
tures means  an  emancipating  of  agriculture. 

Before  describing  more  fully  the  conditions 
under  which  a  settlement  of  the  tariff  problem 
and  of  the  trust  problem  is  possible,  we  may 
dispose  in  a  few  words  of  some  remaining 
plans  for  the  control  of  trusts. 

We  shall  not  depend  on  limiting  the  size  of 
corporations.     We  shall  not  prescribe  a  certain 


/ 


52  THE   CONTROL   OF  TRUSTS 

number  of  millions  of  dollars  as  the  greatest 
amount  of  capital  that  a  corporation  can  have. 
If  we  were  to  do  such  a  thing,  we  should  have 
to  do  it  in  a  way  that  would  make  no  impres- 
sion upon  any  but  the  largest  trusts.  Ten 
million  dollars  in  actual  capital  would  be  suffi- 
cient for  a  majority  of  trusts,  but  it  would  be 
an  absurdly  small  amount  for  some  of  them; 
and  no  legislator  would  think  pi  prescribing  a 
limit  that  would  cripple  important  industries. 


Moreover,  we  shall  not  try  systematically  to 
break  up  the  great  corporations  into  small 
ones.  It  is  conceivable  that  a  statute  might 
be  enacted  which  should  say  that  any  corpo- 
ration producing  more  than  a  quarter  of  the 
supply  of  goods  of  a  given  kind  should  be 
treated  as  a  monopoly  and  outlawed  under  a 
principle  of  common  law  that  is  already  in 
force.  If  such  a  statute  were  effective  to  the 
extent  of  putting  four  smaller  corporations  in 
the  place  of  one  great  one,  we  should  still 
have  to  deal  with  the  underhand  pooling  oper- 
ations which  go  on  now  in  many  places.  The 
four  corporations  would  inevitably  find  ways 
of  acting  in  concert. 


HOW   NOT   TO   DEAL  WITH   TRUSTS  53 

Again,  we  shall  not  prescribe  by  law  the 
prices  at  which  goods  must  be  sold.  The 
difficulties  encountered  by  such  a  policy  are 
so  obvious  that  it  is  scarcely  necessary  to 
mention  them.  It  would  require  commissions 
containing  many  members,  all  wise  and  incor- 
ruptible. It  would  require  superhuman  skill 
in  devising  and  applying  a  scientific  rule  for 
adjusting*  prices.  Granting  that  commissions 
having  such  impossible  qualities  could  be 
secured  and  that  their  action  could  be  made 
effective,  the  result  would  have  to  resolve  it- 
self into  a  regulation  of  profits.  The  only 
basis  on  which  prices  could  be  prescribed 
would  be  one  of  cost.  We  should  wish  to 
leave  to  the  producer  a  return  that  would  pay 
fair  wages,  managers'  salaries,  interest  on  cap- 
ital and  insurance  against  risks.  We  should 
make  the  price,  in  short,  cover  costs  of  pro- 
duction, as  liberally  and  scientifically  inter- 
pretedi  Competition,  however,  itself  tends  to 
make  prices  conform  to  this  standard.  It 
tends  continually  to  rule  out  of  existence  cer- 
tain net  profits  which  are  in  excess  of  costs. 
Law,    moreover,    is    a    poor    instrument    for 


54  THE   CONTROL   OF  TRUSTS 

accomplishing  such  a  result.  If  it  worked 
quickly  and  remorselessly  in  forcing  prices 
down  to  the  cost  level,  it  would  do  more 
harm  than  the  trusts  have  done. 

Further,  we  shall  not  tax  profits  out  of 
existence.  We  shall  not  enact  that  all  gains 
above  five  or  six  per  cent  on  the  amount  of 
capital  used  shall  be  made  over  to  the  state. 
That  would  stop  progress.  Why  should  a 
man  improve  his  methods  or  deprive  himself 
of  any  sleep  in  the  effort  to  organize  his 
establishment  in  an  effective  manner,'  if  the 
most  he  can  get  in  any  case  is  a  fixed  gain  of 
five  or  six  per  cent.?  It  would  be  better  to 
use  the  old  machinery,  to  run  the  ill-located 
mill,  to  retain  inefiicient  managers,  etc.  In- 
ventors would  find  a  poor  market  in  a  country 
where  profits  should  be  fixed  by  law. 

Finally,  we  shall  not  try  the  experiment  of 
state  socialism.  This  proposition  may  require 
an  extended  argument,  which  cannot  here  be 
given.  There  is  no  doubt  that  the  growth  of 
trusts  has  caused  state  socialism  to  present 
itself  to  many  a  mind  as  a  possible  alternative 
for  a  regime  of  monopoly ;  and  if  it  were  the 


HOW   NOT   TO   DEAL   WITH    TRUSTS  55 

only  alternative,  the  case  for  it  would  be  a 
strong  one.  As  between  a  system  of  unregu- 
lated monopolies  in  private  hands  and  one 
great  public  monopoly,  many  a  man  will  prefer 
the  latter.  The  situation,  however,  is  not  so 
serious.  The  trust  is  not  now  unregulated, 
and  it  is  by  no  means  incapable  of  further 
regulation.  There  are  things  now  doing,  and 
there  are  more  to  be  done.  There  is  in  sight 
a  condition  in  which  these  corporations  may 
serve  the  public.  They  may  give  us  the  bene- 
fit of  their  efficiency.  They  may  play  their 
part  in  promoting  commercial  expansion  and 
put  this  country  into  a  position  of  peaceful  dom- 
inance in  the  world's  affairs.  They  may  con- 
ceivably do  this  without  oppression.  They 
may  not  tax  the  consumer  or  crush  wage- 
earners.  The  route  to  this  desirable  state  is 
not  easy,  but  I  venture  to  assert  that  it  is  be- 
coming reasonably  plain.  The  solution  of  the 
trust  problem  is  not  as  baffling  as  it  has 
been. 


CHAPTER   IV 

MONOPOLIES   AND   THE   LAW 

In  dealing  with  trusts  it  might  be  expected 
that  theory  would  be  bold  and  practice  con- 
servative. In  fact,  however,  actual  law-making 
has  gone  to  the  extreme  of  boldness,  while 
theory  has  steadily  held  to  the  more  moderate 
way.  Practice  is  apparently  about  to  take  the 
latter  course.  The  policy  of  the  future  is  well 
in  sight;  and  it  involves  changes  in  the  pres- 
ent condition  that  are  so  moderate  as  almost 
to  incur  the  suspicion  of  being  a  laissez  faire 
course.  And  yet  it  is  an  effective  policy  for 
the  regulation  of  trusts,  and  will  do  its  work 
so  well  that  it  will  stir  up  strong  resistance, 
and  therefore  the  execution  of  it  will  require 
all  the  energy  which  a  people  devoted  to  indus- 
trial freedom -will  be  able  to  use. 

In  the  making  of  new  laws  we  shall  do 
first  what  is  most  undeniably  wise  —  tl^at  is, 
give  protection  to  investors.     When  the  public 

56 


MONOPOLIES   AND  THE   LAW  57 

is  invited  to  buy  stocks  and  bonds  of  industrial 
companies,  it  needs  to  know  what  real  prop- 
erty it  is  getting  by  its  purchases ;  and  it 
will  find  a  way  to  make  the  needed  facts 
accessible. 

When,  however,  the  investor  shall  have 
been,  if  not  protected,  at  least  placed  where 
he  can  protect  himself,  the  graver  difficulties 
connected  with  the  regulation  of  trusts  will 
begin.  It  is  not  for  the  harm  that  they  do 
to  the  men  who  own  them,  even  though 
these  men  may  pay  too  much  for  the  owner- 
ship, that  monopolies  are  dreaded.  It  is  for 
the  harm  that  they  threaten  to  do  to  the  pub- 
lic. Consumers  are  in  danger,  and  so  are  all 
laborers  who  are  not  specially  aided  at  the 
cost  of  consumers.  The  trust  may  pay  its 
own  operatives  well ;  but  it  may  close  mills 
and  force  many  employees  into  other  occupa- 
tions. It  is  there  that  the  injury  to  labor  is 
located.  There  are,  indeed,  four  parties  who 
have  a  common  interest  in  curbing  monopolies : 
namely,  the  independent  producer,  the  con- 
sumer, the  farrneF'ahd  the  unprotected  laborer. 
The  rival  producer  may  be  crushed  and  the 


58  THE   CONTROL   OF   TRUSTS 

consumer  may  be  made  to  pay  high  prices 
for  goods.  The  farmer,  as  a  buyer  of  such 
goods,  may  be  taxed  on  his  consumption, 
and  he  may  be  made  to  take  low  prices  for 
the  raw  materials  that  he  has  to  sell.  The 
laborer  who  is  riot  tied  in  interest  to  the  trust 
itself,  by  receiving  a  premium  on  ordinary 
wages,  may  suffer  with  the  rest  through  a 
reduction  of  his  pay.  All  this  may  happen ; 
and  it  will  happen  to  the  extent  that  these 
consolidations  acquire  the  amount  of  monopo- 
listic power  that  it  is  for  their  interest  to 
gain. 

The  key  to  the  solution  of  the  grave  prob- 
lems that  are  thus  presented  lies  in  the  fact 
that  the  independent  producer  is  the  natural 
protector  of  all  the  other  threatened  interests. 
If  the  trust  cannot  crush  him,  it  can  neither 
tax  consumers  through  high  prices  of  finished 
goods  nor  mulct  farmers  through  low  prices 
of  raw  materials;  and  it  cannot  depress  the 
general  rate  of  pay  for  labor.  Goods  will  be 
produced  at  normal  prices,  and  all  who  help 
to  make  them  will  get  normal  returns,  so  long 
as  competition  is  kept  alive. 


MONOPOLIES  AND   THE   LAW  59 

But  it  is  not  easy  to  keep  competition  in 
vigorous  life.  The  great  company  has  ways 
of  clubbing  the  men  who  are  bold  enough 
to  rival  it.  This  is  not  done  by  the  old  and 
familiar  plan  of  reducing  costs  and  under- 
bidding the  inefficient  producers.  That  is  a 
part  of  the  established  order  of  things.  The 
economic  organism  has  become  efficient  as  it 
is  because  capable  producers  have  survived  and 
others  have  perished.  The  process  has,  indeed, 
had  its  serious  hardships.  We  have  been 
appalled  by  the  law  that  holds  an  inexorable 
fate  over  every  employer  who  cannot  get  out 
of  labor  and  capital  as  large  a  product  as  his 
rivals  are  getting;  but  for  society  as  a  whole 
there  is  gain  coming  from  this.  CThe  hope 
of  an  endless  increase  of  productive  power  — 
of  a  perpetual  rise  in  the  level  of  all  economic 
life  —  lies  in  the  continued  action  of  this  law 
of  survival  by  which  only  the  best  servants 
of  mankind  are  retained.^ 

At  present  the  situation  is  the  reverse  of 
this.  The  interests  of  the  public  itself  are 
now  threatened  by  the  destruction  of  com- 
peting producers.      This  is   because    it   is    no 


"I 


60  THE   CONTROL   OF   TRUSTS 

longer  by  reason  of  inferior  efficiency  that 
they  are  in  danger  of  being  crushed.  It  is 
not  the  unfit,  but  the  particularly  fit,  that  are 
in  danger  of  going  to  the  wall.  The  com- 
peting power  that  threatens  to  destroy  them 
depends,  not  on  economy  in  production,  but 
on  special  and  unfair  fighting  powers  that 
great  size  gives.  The  really  efficient  pro- 
ducer, the  man  who  can  make  goods  even 
more  cheaply  than  the  trust  can  make  them, 
is  now  in  peril.  It  is  this  man  who  must 
at  all  hazards  be  kept  in  the  field.  We,  the 
people,  must  use  the  law  to  protect  him,  as 
he  uses  his  economic  power  to  protect  us. 

Now,  the  first  and  easiest  thing  for  us  to 
do,  in  thus  guarding  our  guardian,  is  to  secure 
for  him  fair  treatment  by  railroads.  If  the  trust 
gets  a  rebate  which  he  cannot  get,  it  has  him 
at  its  mercy.  It  may  ruin  him,  even  though 
he  may  be  able  to  make  goods  more  cheaply 
than  the  trust  itself  can  make  them.  Moreover, 
it  is  the  prohibition  of  pooling  by  the  railroads 
themselves  that  subjects  them  to  the  tempta- 
tion to  make  the  discriminating  charges.  In 
a  pool  they  would   have  no  reason  for  trying 


MONOPOLIES   AND   THE   LAW  6l 

to  lure  away  from  each  other  the  traffic  of 
the  large  shippers.  Yet  the  toleration  of  pool- 
ing means  the  regulation  of  freight  charges 
by  the  state.  It  has  lately  come  about  that 
the  attempt  to  preserve  competition  among 
common  carriers  has  gone  far  toward  extin- 
guishing it  among  manufacturers.  Competing 
railroads,  a  struggle  for  the  business  of  large 
producers,  secret  rebates  to  such  producers,  the 
extinction  of  small  rivals  and  an  approach  to 
monopoly  in  many  branches  of  production  — 
this  is  the  series  of  phenomena  that  we  have 
recently  witnessed.  Railroads  in  pools,  regu- 
lated charges  and  a  fair  field  for  the  small 
producers  —  this  is  the  alternative  series;  and 
it  is  the  one  that  in  the  end  we  shall  choose 
unless  we  are  driven  to  a  much  bolder  course, 
the  giving  over  of  railroads  to  the  government. 
An  exceptional  functionary  is  the  common 
carrier,  and  we  shall  be  forced  to  deal  with  him 
as  we  shall  not  deal  with  others.  His  position 
is  strategic,  and  we  cannot  long  allow  it  to  be 
used  in  a  way  that  creates  monopoly  in  the 
remainder  of  the  economic  field.  Without 
pretending  to  deal  adequately  with  the  prob- 


(A 


62  THE   CONTROL   OF   TRUSTS 

lems  of  transportation,  I  record  the  belief  that 
the  mode  of  solving  them  will  not  be  through 
state  ownership,  but  rather  by  state  regulation. 
The  type  of  regulation  that  we  are  now  trying 
to  enforce  is  more  difficult  than  another  one 
would  be,  and  this  other  one  would  actually  meet 
the  exigencies  of  our  position.  We  want  all 
producers  treated  fairly;  but  we  are  trying  to 
make  the  carriers  treat  them  thus,  while  we 
keep  the  carriers  themselves  under  a  great  temp- 
tation to  deal  unfairly.  It  is  the  competition 
of  railroads  with  each  other  —  the  effort  to  lure 
traffic  from  one  another  —  that  affords  the  chief 
incentive  for  secret  rebates  to  the  larger  ship- 
pers. Let  the  competition  end  itself  by  means 
of  pools,  and  you  put  an  end  to  this  tempta- 
tion; for  then  there  is  no  longer  anything 
to  be  made  by  giving  such  rebates.  We  must 
now  protect  the  public  against  charges  that  in 
an  all-around  way  may  be  too  high ;  but  we  can 
probably  do  this  more  easily  than  under  the 
present  plan  we  can  prevent  discriminations. 
If  all  railroads  were  pooling  their  earnings, 
they  would  want  to  make  their  rates  high  and 
the  public  would  want  to  keep  them  low.     The 


MONOPOLIES   AND   THE    LAW  63 

issue  would  be  clearly  drawn;  and,  though  it 
might  take  a  supreme  effort  to  get  the  right 
law  enacted  and  enforced,  the  evasion  of  the 
law  would  be  less  easy  than  is  the  evasion  of  a 
law  requiring  competing  lines  to  treat  all  ship- 
pers alike.  The  law  can  protect  the  whole 
public  against  a  generally  high  scale  of  charges 
more  easily  than  it  can  protect  a  small  shipper 
against  special  favors  accorded  to  his  powerful 
rival. 

It  may  be  taken  for  granted  that  the  unequal 
treatment  of  different  shippers  is  an  evil  so 
great  that,  sooner  or  later,  it  must  and  will  be 
suppressed.  When  that  is  done,  we  shall  find 
ourselves  at  the  beginning  of  more  serious 
work.  There  will  remain  in  the  hands  of  the 
trust  weapons  by  means  of  which  it  can  destroy 
its  rivals ;  and  these  cannot  so  easily  be  taken 
away.  If  the  solution  of  the  railroad  problem 
is  hard,  the  solution  of  the  remaining  part  of 
the  problem  of  monopoly  is  still  harder ;  but  it 
is  not  beyond  the  power  of  the  people,  if  that 
power  be  directed  with  intelligence. 

There  are,  as  we  have  seen,  three  ways,  all 
now  well  known,  in  which  a  trust  can  crush  an 


64  THE  CONTROL  OF   TRUSTS 

efficient  competitor.  The  rival  may  be  pro- 
ducing goods  cheaply,  and  he  may  be  the  man 
who  normally  ought  to  survive;  and  yet  the 
trust  may  ruin  him.     It  may  make  use  of  the 

flj  "factors'  agreement,"  by  which  it  gives  a  special 
rebate  to  those  merchants  who  handle  only  its 
own  goods.      It  may  resort,  secondly,  to  the 

/  ^^  local  cutting  of  prices,  whereby  the  trust  enters 
its  rivars  special  territory  and  sells  goods  there 
below  the  cost  of  producing  them,  while  sustain- 
ing itself  by  means  of  higher  prices  charged  in 
other  portions  of  its  field.  Again,  the  trust  may 
)  depend  on  the  cutting  of  the  price  of  some  one 
I  variety  of  goods  which  a  rival  producer  makes, 

i  /in  order  to  ruin  him,  while  it  sustains  itself 
by  means  of  the  high  prices  which  it  gets  for 
)goods  of  other  kinds.  These  three  things  make 
the  position  of  a  competitor  perilous.  If  the 
trust  were  prevented  from  resorting  to  them, 
competition,  real  or  potential,  would  not  only 
protect  the  public,  but  would  insure  to  it  a  large 
share  of  the  benefit  that  comes  from  economies 
in  production.  Independent  mills  would  con- 
tinue to  be  built  and  would  be  equipped  with 
machinery  so  efficient  that  a  trust  would  have 


MONOPOLIES   AND   THE   LAW  65 

to  be  forever  on  the  alert  in  keeping  abreast 
with  them.  There  is  no  conceivable  condition 
in  which  both  consumers  and  laborers  would 
find  their  interests  so  well  guarded  as  one  in 
which  trusts  should  be  allowed  to  exist  without 
let  or  hindrance,  but  in  which  the  prices  of  their 
goods  should  be  forced  continually  downward 
by  the  necessity  for  meeting  actual  or  possible 
rivalry. 

It  is  not  difficult  to  see  what  is  needed  in 
order  to  make  the  independent  competitors 
thus  secure.  In  a  fair  contest  for  survival  they 
can  protect  themselves.  In  such  a  struggle 
everything  depends  on  mere  efficiency  in  pro- 
duction, and  they  may  well  be  subjected  to  the 
full  force  of  it.  When  economy  in  production 
no  longer  saves  them,  it  is  time  for  the  state  to 
intervene ;  and  it  needs  to  do  this,  if  it  would 
carry  out  the  very  end  for  which  it  was  originally 
established,  —  the  protection  of  property  itself, 
by  the  suppression  of  refined  forms  of  robbery. 

The  factors'  agreement,  the  local  cut  in 
prices  and  the  illegitimate  breaking  of  a  gen- 
eral scale  of  prices  must,  then,  in  some  way  be 
stopped.     If  laws  were  self-executing,  it  would 


66  THE   CONTROL  OF   TRUSTS 

be  easy  to  stop  them.  These  unfair  acts  could 
all  be  defined  and  forbidden;  but  not  many 
laws  are  more  difficult  of  enforcement  than 
these  would  be.  To  forbid  the  factors'  agree- 
ment is  virtually  to  order  the  trust  to  sell  goods 
of  any  kind  to  any  customer  who  tenders  pay- 
ment for  them ;  and  the  order  might  remain  a 
dead  letter.  Prohibiting  local  discriminations 
in  prices  might  have  no  better  result. 

You  may,  indeed,  ordain,  under  severe  penal- 
ties, that  prices  of  a  particular  article  shall  be 
uniform  to  purchasers  in  every  part  of  the 
United  States.  The  costs  of  transportation 
should,  of  course,  be  taken  into  account,  and 
the  distant  purchaser  should  pay  a  larger 
freight  charge  than  the  near  one;  but  the 
price  at  the  point  of  shipment  should  be  uni- 
form for  both.  A  difficulty  would  at  once  arise 
from  the  fact  that  merchandise  seldom  has 
those  qualities  which,  in  connection  with  money, 
have  been  termed  homogeneity  and  cogniza- 
bility.  The  goods  vary  in  quality,  and  it  is 
not  always  possible  for  a  purchaser  to  tell  of 
what  quality  they  are.  If  a  trust  wished  to 
crush    a   competitor  in    Minnesota,  by  selling 


MONOPOLIES   AND  THE    LAW  6*J 

within  that  state  certain  goods  at  less  than  it 
cost  to  make  them,  it  could  perhaps  accomplish 
its  purpose,  in  spite  of  such  a  law  as  is  here 
suggested,  by  making  a  special  type  of  goods 
and  offering  it  exclusively  in  the  market  of 
Minnesota.  It  might  create  an  entirely  new 
brand  of  goods  and  offer  it  nowhere  except  in 
this  one  state ;  and  there  it  might  offer  it  at  a 
price  that  no  competitor  could  meet. 

It  would,  indeed,  be  true  that,  under  the  sup- 
posed law,  the  trust  would  be  obliged  to  sell 
goods  of  this  special  brand  to  consumers  in 
other  states  at  the  same  price  at  which  it  sold 
them  in  Minnesota ;  and  if  orders  were  to  come 
promptly  and  freely  from  the  other  states,  its 
attempt  to  ruin  its  competitors  might  prove 
costly  and  unsuccessful.  Sooner  or  later  the 
orders  would  doubtless  come,  and  the  strategy 
of  the  trust  would  no  longer  serve  its  purpose ; 
but  an  independent  producer  might  not  hold 
out  long  enough  to  get  the  relief  thus  afforded. 
During  an  interval  the  trust  would  secure  high 
prices  in  every  state  but  one ;  and  in  that  sin- 
gle state  it  could  afford  to  stand  a  loss  for  the 
sake  of  ruining  its  competitor. 


68  THE   CONTROL   OF   TRUSTS 

Even  this  difficulty  is  not  as  great  as  is  that 
encountered  in  the  effort  to  suppress  the  break- 
ing of  a  scale  of  prices  and  the  making  of  a 
ruinous  rate  on  a  single  article  that  figures  in 
the  scale.  The  independent  mill  may  be  send- 
ing its  goods  all  over  the  country,  but  it  may 
make  goods  of  only  one  kind.  How  shall  we 
prevent  the  trust  from  temporarily  selling  at  a 
ruinous  rate  goods  of  this  one  kind  ? 

It  is  true,  indeed,  that  this  particular  club, 
which  would  be  very  effective  in  braining  a 
single  small  competitor,  would  be  of  no  use 
against  a  combination  of  small  producers  mak- 
ing, in  their  various  shops,  as  complete  an 
assortment  of  goods  as  is  made  by  the  attack- 
ing trust  itself.  The  cut  on  one  article  made 
by  the  big  corporation  could  be  met  by  a  simi- 
lar cut  on  that  same  article  made  in  one  of  the 
shops  controlled  by  the  pool ;  and  this  affords 
a  reason  for  thinking  that  the  permanent 
policy  of  this  country  will  not  be  hostile  to  such 
pools.  In  foreign  countries  they  are  treated 
with  toleration,  if  not  with  friendliness ;  and  for 
defensive  purposes  in  wars  against  vast  corpora- 
tions they  may  have  a  function  to  perform  here. 


MONOPOLIES   AND  THE   LAW  69 

If  it  could  be  proved  that  a  reduction  in  the 
price  of  some  one  type  of  goods  was  not  justi- 
fied by  changes  in  the  conditions  of  production, 
this  would  be  an  evidence  that  the  cut  was 
made  for  a  predatory  purpose.  If  the  price  of 
the  particular  grade  of  goods  were  first  put 
down  and  then  put  up  again,  and  if  rivals  were 
crushed  in  the  interval,  this  would  be  evidence 
that  the  purpose  of  the  cut  was  illegitimate. 
Sharp  enough  penalties  for  such  conduct, 
enforced  in  a  few  cases,  might  make  the  policy 
too  dangerous  to  be  practised.  It  is  not  to  be 
admitted  that  statutes  for  the  suppression  of 
wars  of  extermination,  such  as  a  trust  can  now 
wage  against  its  rivals,  are  powerless.  They 
are,  to  be  sure,  difificult  of  enforcement;  but  if 
the  people  were  living  always  in  a  heroic  mood 
and  maintaining  a  fierce  watchfulness  over  their 
officers,  the  thing  desired  would  certainly  be 
done,  and  it  may  be  done  in  any  case. 

There  is  a  better  thing  of  be  done.  Statutes 
are  not  our  sole  reliance.  The  American  law- 
yer may  gauge  his  skill  by  his  success  in  "driv- 
ing a  coach  and  four  through  them."  Where 
statutes  are  the  only  reliance,  technicalities  are 


70  THE   CONTROL  OF   TRUSTS 

in  favor  of  the  criminal,  and  lawyers  secure 
immunity  for  him.  The  most  efficient  action 
that  has  thus  far  been  taken  in  curbing  the 
power  of  trusts  has  been  taken  under  the  com- 
mon law.  It  forbids  monopoly,  and  there  is  no 
possible  danger  that  this  prohibition  will  ever 
be  abandoned.  To  tolerate  a  monopoly  in  pri- 
vate hands,  is  to  vest  in  a  few  persons  the  power 
to  tax  the  rest  of  the  community ;  and  this  will 
never  be  permitted.  The  thing  to  be  done 
is  to  discover  what  is  a  monopoly  and  to  de- 
cide what  shall  be  done  with  it  where  it  is 
identified.  At  present  there  rests  upon  the 
courts  the  duty  of  determining  in  what  cases 
a  monopoly  actually  exists ;  and  the  determina- 
tion has  its  difficulties.  How  shall  a  monopo- 
listic corporation  be  defined.?  Is  it  the  only 
corporation  from  which  an  article  can  be  pro- 
cured? If  so,  there  are  scarcely  any  such 
monopolies  now  in  existence.  In  nearly  every 
industry  there  is  a  fringe  of  independent  life 
remaining.  The  trusts  take  the  centre  of  the 
field  and  let  a  few  small  rivals  operate  on  the 
outskirts.  If  these  are  in  the  trust's  power 
and    are    compelled    to    do    its    bidding,   the 


MONOPOLIES    AND   THE    LAW  71 

monopoly  is  essentially  complete.  If,  then, 
new  and  strong  competitors  are  precluded  from 
appearing,  the  position  of  the  monopoly  is 
secure ;  for  it  has  nothing  to  fear  on  the  eco- 
nomic side.  Just  here,  therefore,  its  danger 
on  the  legal  side  ought  to  begin ;  for  it  is  the 
banishing,  not  merely  of  the  actual,  but  of  the 
potential,  competitor  that  makes  it  a  monopoly. 
If  the  law  will  take  it  effectively  in  hand  at 
the  point  where  competition  of  the  potential 
kind  ceases  to  restrain  it,  nothing  more  is 
needed.  Let  us,  then,  enforce,  the  common 
law  as  it  stands.  What  is  to  be  desired  is  a 
recognition  of  potential  competition  as  a  regu- 
lator and  of  the  means  used  to  destroy  its 
power,  with  a  rigorous  use  of  the  legal  force, 
wherever  these  means  are  employed. 

There  are  some  economic  distinctions  that 
will  have  to  win  recognition  before  the  course 
of  legal  proceeding  in  the  case  of  monopolies 
can  be  clear.  -.  To  dominate  weak  rivals  and  to 
prevent  strong  ones  from  appearing,  is  to  per- 
form the  act  and  to  take  on  the  character  of  a 
monopoly.  But  the  large  and  efificient  mill  that 
has  not  yet  been  built  is  a  regulator  of  prices 


72  THE   CONTROL   OF   TRUSTS 

in  advance  of  its  existence.  If  the  way  is 
quite  open  for  it  to  appear,  the  trust  cannot 
long  keep  prices  at  a  high  level,  and  cannot 
put  them  there  at  all  with  safety  for  itself.  The 
test  of  the  question  whether  the  great  corpora- 
tion is  or  is  not  a  true  monopoly  is  applied  by 
determining  whether  the  way  is  or  is  not  open 
for  the  competitor  to  appear.  If  the  new  mill 
can  be  built  without  danger  that  the  trust  will 
close  it  by  means  of  some  of  the  illegitimate 
practices  above  described,  the  great  corporation 
is  a  beneficent  institution.  It  will  produce 
goods  economically,  develop  an  expert  business 
and  accumulate  capital  in  a  degree  that  will 
go  far  toward  giving  to  our  country  financial 
dominance  in  the  world.  If  the  rival  mill  is 
terrorized  in  advance  and  precluded  from  ap- 
pearing, the  trust  has  all  the  evil  traits  that  the 
term  "  monopoly  "  implies.  It  is  a  monster  in 
size,  in  either  case ;  but  the  difference  between 
being  a  docile  servant  of  man  and  a  predatory 
beast  is  made  by  a  mere  potentiality.  Can  the 
rival  safely  appear  or  can  he  not  ?  is  the  test 
question  in  the  case. 

Size,  then,  does  not  make  a  monopoly.    Con- 


MONOPOLIES   AND   THE  LAW  73 

ceivably  a  corporation  might  make  all  the 
goods  of  a  given  class  and  yet  be  held  com- 
pletely in  check  by  merely  potential  competitors. 
Practically,  in  some  departments  of  industry, 
an  approach  to  this  condition  now  exists  and 
makes  the  state  of  society  a  startling  one, 
though  still  tolerable.  The  power  for  evil  that 
goes  with  size  may  not  be  used.  When  it  is 
used,  the  predatory  work  begins.  Monopoly 
is  that  monopoly  does ;  and  the  typical  act 
that  identifies  the  unlawful  power  is  the  crush- 
ing of  rivals  by  the  means  above  described. 

Advancing  rapidly  is  the  time  when  to  every 
highly  developed  state  there  will  be  presented 
a  sharp  practical  alternative.  It  is  between 
keeping  alive  the  power  of  potential  competi- 
tion and  not  doing  so  ;  and  this  means  a  choice 
between  putting  its  citizens  actually  into  the 
power  of  the  "  octopus "  of  popular  rhetoric 
and  keeping  them  free.  Nothing  but  com- 
petitive power  of  some  kind  can  take  from 
monster-like  consolidations  of  capital  their 
power  to  do  evil,  while  leaving  to  them  both 
their  power  to  do  good  and  a  motive  for  exercis- 
ing it.     If  it  is  certain  that  the  competitor  will 


74  THE   CONTROL   OF  TRUSTS 

promptly  materialize  when  he  is  needed,  the 
trust  is  eminently  useful ;  but  as  this  certainty 
shades  off  into  a  bare  probability,  or  even  into 
an  improbability,  the  evil  qualities  of  the  com- 
bination grow  and  the  good  ones  gradually 
vanish.  Size  without  predatory  power,  then, 
makes  a  corporation  beneficent ;  but  size  with 
this  evil  endowment  makes  it  a  menace  to  free- 
dom ;  and  the  power  to  work  harm  depends 
on  the  special  practices  that  have  been  men- 
tioned—  namely,  the  favors  exacted  from  rail- 
roads, which  we  assume  will  before  long  be 
stopped,  the  local  cutting  of  prices  of  goods,  the 
breaking  of  a  scale  of  prices  and  the  type  of  boy- 
cotting termed  the  "  factors'  agreement,"  which, 
as  we  claim,  must  be  stopped.  By  these  means 
the  trust  can  often  crush  a  rival ;  and  the  prospect 
that  it  will  resort  to  them  often  terrorizes  the 
rival  in  advance  and  prevents  him  from  appear- 
ing in  the  field.  The  trust  has  but  to  brandish 
its  clubs  when  the  rival  producer  is  taking  his 
preliminary  survey  of  .the  field.  It  will  not 
need  to  use  them,  for  the  rival  will  vanish. 

There  are,  then,  at  least  two  potentialities 
that   have   to   be   taken   into   account    if    the 


MONOPOLIES  AND   THE   LAW  75 

present  situation  is  to  be  understood  and  if  a 
future  policy  is  to  be  wisely  determined.  If 
new  competition  is  sure  to  spring  up  in  case 
prices  are  raised,  they  will  not  be  raised.  They 
will  continue  to  be  held  down  by  a  possible 
producing  agent,  and  not  by  one  that  is  actu- 
ally present  and  acting.  This  is  potentiality 
number  one.  It  may  be  that  the  new  com- 
petitor will  not  dare  to  appear,  because  the 
trust  will  use  its  clubs  in  case  he  does  so. 
This  is  potentiality  number  two,  which  neu- 
tralizes tKe  first  one  and  leaves  the  monopoly 
unchecked.  The  certainty  that  a  competitor 
will  be  ruined,  if  he  appears,  takes  away  all 
probability  of  his  appearing;  and  this  proba- 
bility affords  the  only  natural  check  of  any  im- 
portance on  the  action  of  the  monopoly.  What 
is  wanted  is  a  third  potentiality,  such  as  the  law 
alone  can  afford.  It  needs  to  be  made  sure  that, 
if  the  trust  uses  its  clubs  on  the  competitor,  the 
law  will  use  its  own  clubs  on  the  trust.  This 
will  preclude  the  crushing  of  the  new  pro-  j 
ducers.  The  second  potentiality,  the  bad  one  \ 
in  the  case,  will  then  be  removed,  while  the  first  ^ 
and  good  one  will  be  restored.      If  the  trust 


'j6  THE   CONTROL   OF   TRUSTS 

has  much  to  dread  from  the  civil  power,  in 
case  it  ruins  competitors  unfairly,  it  will  give 
them  a  fair  field.  This  is  all  they  need;  and, 
with  this  assured,  they  will  appear  promptly 
whenever  prices  are  raised  to  an  extortionate 
level.  But  such  a  rise  will  not  take  place. 
The  potential  competitor  will  protect  the  pub- 
lic from  extortion,  because  a  potency  residing 
in  the  law  annihilates  the  trust's  power  to 
destroy  him.  From  every  point  of  approach 
we  are  led  to  the  conclusion  that  the  law 
must  disarm  the  trusts  —  it  must  take  away 
the  weapons  which  are  available  only  for  evil. 
The  railroad  problem  must  first  be  solved  and 
fair  treatment  for  all  shippers  must  be  secured. 
Then  factors'  agreements,  the  local  cutting  of 
prices  and  the  predatory  breaking  of  a  scale  of 
prices  must  be  forbidden,  and  there  must  be  a 
real  force  behind  the  prohibition. 

The  difficulties  in  the  way  of  such  a  policy 
have  not  been  denied.  Are  they  insurmount- 
able .f*  Some  thoughtful  persons  have  said 
so;  but  this  verdict  has  resulted  from  con- 
sidering merely  the  power  of  statutes,  the  ease 
of    evading   them  and   the  skill  of    the   tech- 


MONOPOLIES   AND   THE   LAW  'j'j 

nical  lawyer  in  securing  immunity  for  those 
who  evade  them.  The  case  does  not,  however, 
depend  on  statutes.  There  is  the  never-to-be- 
abandoned  principle  of  common  law,  that  a 
monopoly  is  contrary  to  the  public  interest 
and  definitely  outlawed.  There  is  the  fact  that 
mere  size  affords  presumptive  evidence  that 
a  corporation  is  liable  to  this  condemnation. 
There  is  the  evidence  to  be  had  from  the 
raising  of  prices  and  the  shutting  down  of 
mills.  There  is  needed  further  evidence  from 
the  treatment  of  rivals.  It  is  not  impossible 
to  discover  when  a  trust  is  clubbing  its  com- 
petitors, in  one  or  more  of  the  ways  that  have 
been  described.  Forbid  such  practices  and 
prescribe  as  severe  penalties  as  you  will  for 
resorting  to  them.  Let  the  statutes  give  every 
chance  to  suppress  them.  Make  the  local 
cutting  of  prices,  the  breaking  of  a  scale  of 
prices  for  a  predatory  end  and  the  factors' 
agreement  illegal  and  punishable ;  and  do  what 
you  can  to  secure  an  execution  of  the  law. 
In  doing  this  you  will  not  have  exhausted  the 
power  of  the  state,  nor  will  you  have  drawn 
on   it   in   the   most   available  way;   for   there 


78  THE   CONTROL   OF   TRUSTS 

will  remain  the  common  law  demand  for  the 
repression  of  monopoly.  On  the  courts  there 
will  continue  to  rest  the  duty  of  detecting  the 
monopoly  and  pronouncing  the  condemnation ; 
and,  if  the  evil  practices  continue,  the  monopo- 
lies will  exist  and  invite  the  court's  decree. 

The  actual  present  situation  is  one  in  which 
a  hundred  great  corporations  would  become  un- 
restrained monopolies  and  liable  to  the  fullest 
condemnation,  if  it  were  not  for  a  certain  amount 
of  potential  competition.  But  the  extent  of  the 
influence  that  this  kind  of  competition  exerts 
is  insufficient.  Within  limits  a  trust  may  raise 
its  prices  unduly,  because  the  competitor  can- 
not be  drawn  into  the  field  except  by  a  large 
inducement.  He  must  have  a  prospect  of  gain 
that  will  offset  a  peril.  Society  can  count  on 
his  coming  when  it  pays  prices  that  are  high 
enough  to  lure  him  into  the  danger,  but  not 
before.  Up  to  this  point  the  trust  can  have 
its  way.  It  is  a  true  monopoly  with  limited 
powers;  and  only  because  of  this  limitation 
does  the  common  law  fail  vigorously  to  assert 
itself.  We  are  establishing  in  the  body  eco- 
nomic a  state  which  resembles  that  condition 


MONOPOLIES   AND   THE   LAW  79 

induced  in  an  individual  body  by  taking  in 
small  quantities  of  a  poison  against  which  the 
system  revolts.  As  the  medical  term  expresses 
it,  we  are  "  establishing  a  tolerance  "  of  monop- 
oly. We  are  reconciling  ourselves  to  a  limited 
exercise  of  its  power  for  evil,  in  view  of  a  cer- 
tain power  that  it  has  for  good.  There  is 
peril  for  the  state  in  this  course,  which  will 
strengthen  decisively  the  growing  demand  that 
the  government  shall  take  industries  mto  its 
own  hands  and  manage  them  for  the  public 
welfare. 

What  is  needed  is  to  make  each  one  of  the 
practices  by  which  competitors  are  terrorized 
legal  evidence  of  the  existence  of  a  monopoHs- 
tic  power  and  to  condemn,  under  the  common 
law,  any  corporation  that  shall  afford  this  evi- 
dence. This  procedure  should  be  made  so 
sure  that  the  competing  producer  will  always 
dare  to  come  when  he  is  wanted.  He  will  not 
be  safe,  if  he  cannot  produce  goods  cheaply; 
but  if  he  can  do  this,  his  continuance  will 
be  assured.  The  law  will  then  take  in  hand 
the  power  that  would  treat  him  unfairly.  The 
clubbing  of  independent  producers  can  be  de- 


So  THE   CONTROL   OF   TRUSTS 

tected,  and  it  is  not  impossible  directly  to  punish 
it,  if  the  people  will  show  determination ;  but 
it  is  worth  more  to  use  it  as  a  decisive  addi- 
tion to  the  mass  of  evidence  which,  under  the 
common  law,  can  convict  the  monopoly.  The 
duty  of  convicting  it  now  rests  on  the  courts, 
and  accordingly  there  rests  on  the  legislatures 
the  duty  of  making  the  conviction  practicable. 
It  is  the  privilege  of  the  people  to  hold  the 
legislatures  to  this  duty. 


CHAPTER   V 

CONCLUSION 

Well  in  sight  is  the  policy  of  the  future  in 
relation  to  trusts.  It  is  one  which  welcomes 
centralization,  but  represses  monopoly.  It  al- 
lows mills  and  shops  to  grow  large  and .  to 
combine  with  each  other,  for  the  sake  of  the 
economy  which  this  growth  insures;  but  it 
puts  a  stop  on  predatory  uses  of  the  power 
that  is  thus  gained.-.^  It  yields  nothing  to  mo- 
nopoly, but  employs  the  statute-making  power 
to  strengthen  in  every  way  the  condemnation 
that  the-  common  law  pronounces  on  it.  Its 
purpose  is  to  blend  efficiency  in  production 
with  equity  in  distribution,  insuring  to  the 
country  that  shall  succeed  in  carrying  out  the 
policy  a  wealth-creating  power  which  will  tell 
greatly  in  international  rivalries  and  will  be 
gained  without  sacrificing  the  rights  of  any 
class  of  its  citizens.     An  abundance  of  riches 

G  8l 


82  THE   CONTROL   OF   TRUSTS 

will  come  by  means  of  it;  but  contentment, 
harmony,  and  even  fraternity,  which  are  worth 
more  than  crude  abundance,  may,  in  the  end, 
come  also.  To  the  country  that  shall,  at  an 
early  date,  unite  in  this  way  collective  pros- 
perity with  internal  harmony,  there  is  offered 
a  position  of  economic  leadership.  It  will  have 
over  other  countries  the  same  advantage  which 
a  man  has  over  other  men  when  he  precedes 
them  in  the  use  of  efficient  machinery,  gaining 
large  profits  for  himself  and  forcing  his  rivals 
to  follow  in  his  footsteps,  in  order  to  save  them- 
selves from  being  crowded  out  of  the  field.  It 
is  not  merely  because  he  has  the  machine,  but 
because  he  has  it  before  others  get  it,  that  he 
reaps  a  return  in  profit  and  power.  The  coun- 
try that  shall  early  utilize  the  power  of  the 
trust  for  good,  while  curbing  its  power  for  evil, 
will  have  as  its  reward  national  profit  and  a 
position  of  leadership  among  nations. 

It  will  be  impossible  to  secure  as  much  as 
this  without  insuring  another  thing  which  is 
worth  even  more ;  for  progress  is  in  itself  the 
summum  bonum  in  economics,  and  that  society 
is  essentially  the  best  which  improves  the  fast- 


CONCLUSION  83 

est.  No  state  can  be  good  if  it  is  stationary,  or 
bad  if  it  is  now  advancing  at  a  satisfactory  rate. 
It  is  the  direction  and  the  rate  of  social  progress 
which  afford  the  supreme  test  of  the  quality 
of  an  economic  system.  Competition  always 
insures  a  forward  movement.  Our  plan  pro- 
poses to  keep  it  alive,  first,  as  the  immediate 
protector  of  farmers,  laborers,  consumers  and 
independent  producers.  We  wish  it  to  act  so 
that  no  one  of  these  classes  can  now  be  plun- 
dered. But  we  cannot  keep  it  alive  for  this 
purpose  without  getting  the  benefit  of  its  more 
important  service,  —  that  of  spurring  producers 
to  greater  efficiency.  Regulate  trusts,  if  you 
can,  by  a  cruder  method  and  you  are  likely  to 
see  them  putting  a  damper  on  inventive  genius. 
You  may  see  them  suppressing  improvements, 
in  order  to  use  old  machinery  the  longer. 
Regulate  them  solely  by  the  power  of  compe- 
tition, and  you  will  force  them  to  be  alert  in 
utilizing  improvements,  if  they  would  save  them- 
selves from  the  fate  that  has  always  awaited  the 
tardy  and  unenterprising.  A  small  shop  with 
a  good  machine  may  undersell  a  big  shop  with 
a  poor  one.    It  may  end  by  becoming  big,  while 


84  THE   CONTROL   OF   TRUSTS 

its  rival  dwindles.  Size  affords  no  immunity 
from  the  law  that  writes  over  the  door  of  every 
business  house  permission  to  live,  on  the  sole 
condition  that  it  shall  forever  increase  its  effi- 
ciency. For  future  progress  more  than  for 
present  relief  must  we  rely  on  keeping  alive 
the  power  of  competition.  The  rate  of  our 
own  real  progress  will  vary  with  the  degree 
of  our  success. 

What  is  needed  is  a  laissez  faire  policy  in 
one  sense  of  that  term,  but  not  in  another  sense. 
It  involves  no  dull  letting  alone  of  an  evil  ten- 
dency, but  it  does  involve  allowing  a  natural 
development  to  go  on  unhindered.  Clear  the 
decks  for  action ;  remove  all  obstacles  which 
stand  in  the  way  of  a  healthy  rivalry  in  produc- 
tion—  this  has  always  been  the  sound  rule, 
and  obedience  to  it  has  always  insured  progress. 

In  the  outlook  that  is  opened  to  a  country 
which  shall  combine  high  centralization  with 
effective  competition,  there  are  features  which 
we  have  not  taken  the  time  to  discuss.  In  this 
new  regime  there  is  a  probability  of  greater 
steadiness  in  the  general  economic  movement. 
"  Booms"  and  depressions  may  not  succeed  each 


CONCLUSION  85 

other  as  they  have  done.    The  commercial  crisis 
may  become  a  less  dangerous  phenomenon. 

There  may  also  be  afforded,  before  long,  an  en- 
larged field  for  secure  investments.  The  bonds 
of  industrial  companies  should,  in  the  end,  be- 
come a  safe  form  of  property  for  even  poor  men 
to  hold.  With  improvement  in  the  mode  of 
investing  savings,  there  should  be  an  increase 
in  the  amount  of  the  savings  themselves.  High 
wages,  with  safe  depositories  for  unconsumed 
wages,  should  result  in  larger  accumulations 
made  by  laborers;  and  the  true  proletariat,  in 
so  far  as  it  shall  survive,  may  become  only  a 
remnant  of  the  present  wage-earning  class.  The 
majority  of  those  who  labor  may  possess  capital 
and  the  additional  influence  which  property 
brings;  and  the  stake  which  they  have  in 
the  social  order  may  make  them  use  their  in- 
fluence with  conservatism  and  intelligence.  A 
steady  upward  trend  of  the  level  of  human  life 
should  follow  the  development  that  combines 
centralization  with  competition.  This  is  a  re- 
sult as  well  worth  working  for  as  any  that  has 
ever  been  offered  to  men,  and  should  call  forth 
the  heroic  effort  which  overcomes  every  diffi- 


86  THE   CONTROL   OF  TRUSTS 

culty  that  does  not  amount  to  a  physical  im- 
possibility. 

That  the  society  of  the  future  will  combine 
economy  with  progress,  both  collective  and  per- 
sonal, and  that  it  will  do  this  by  following  a 
plan  which  is  at  least  in  the  general  line  of  the 
course  here  advocated,  is  made  nearly  certain 
by  the  nature  of  the  other  courses  which  are 
possible.  These  are  two  in  number.  We  may 
either  continue  to  make  ineffective  prohibitions 
or  we  may  adopt  the  rule  of  laissez  faire,  leaving 
growing  monopolies  and  their  occasional  rivals 
to  fight  out  the  issue  as  best  they  can.  If  this 
means  a  state  that  is  barely  endurable;  if  it 
leaves  in  the  hands  of  the  consolidations  vast 
power  for  evil  and  reduced  power  to  do  good, 
with  a  lessened  motive  for  using  it;  if  it  ends 
by  establishing  in  the  mind  of  the  people  what 
in  medical  language  is  a  partial  "  tolerance  "  of 
monopoly  —  it  will  put  a  permanent  blight  on 
the  development  of  our  state  and  transfer  to 
others  the  place  of  leadership  which  is  now 
offered  to  us.  If,  on  the  other  hand,  the 
monopolies  get  the  upper  hand,  throwing  off 
more  and  more  the  checks  that  now  limit  their 


CONCLUSION  87 

power,  the  result  will  be  state  socialism.  Be- 
yond a  moderate  distance  the  tolerance  of 
private  monopoly  will  not  go.  Under  such 
conditions  the  state  would  be  urged  to  take 
possession  of  industries  that  assume  a  genu- 
inely monopolistic  form.  The  contest  that 
must  ensue  over  such  a  transfer  would  in- 
volve a  wasteful  and  paralyzing  division  of 
forces;  and,  if  the  transfer  were  actually  to 
be  made,  there  would  remain  the  possibility  — 
or,  rather,  the  imminent  probability  —  of  an  an- 
archic period  and  a  later  reorganization  of  the 
industrial  system  on  a  competitive  plan.  This 
experience  would  be  ruinously  costly,  and  it 
would  be  optimistic  to  expect  that  at  the  end 
of  it  we  should  find  ourselves  in  as  favorable 
a  position  as  the  one  we  are  now  enjoying. 

It  is  better,  however,  to  reach  the  goal  of 
general  prosperity,  which  is  now  directly  before 
us,  without  the  destruction  and  the  rebuilding 
of  the  fabric  of  society.  Long,  indeed,  would 
it  probably  be,  after  a  plunge  into  state  social- 
ism, before  we  should  attain  the  stage  of 
advancement  that  we  have  now  reached.  In- 
creased efficiency  in  production,  through  rapid 


88  THE   CONTROL   OF  TRUSTS 

improvement  in  industrial  methods  and  the  in- 
vention of  automatic  machinery ;  higher  wages, 
with  the  diffusion  of  much  property  in  small 
holdings,  to  offset  the  concentration  of  other 
property  in  large  ones;  greater  steadiness  in 
the  movements  of  trade,  dispensing  with  finan- 
cial and  industrial  crises  —  in  short,  the  attain- 
ment of  those  economic  conditions  under  which 
political  democracy  may  exercise  its  full  power 
for  the  good  of  all  classes  depends  on  the  main- 
tenance of  competition,  in  spite  of  inevitable 
consolidation. 


TRUSTS 


OR 

INDUSTRIAL    COMBINATIONS    AND    COALITIONS 
IN    THE    UNITED    STATES 

By  ERNST  VON  HALLE 

Cloth.    i2ino.    $1.25 


Dr.  von  Halle's  work,  on  "  Industrial  Combinations  and  Coalitions 
in  the  United  States,"  deals  with  an  interesting  and  important  subject. 
The  scope  of  the  work  may  be  indicated  by  enumerating  a  few  of  the 
combines,  in  their  broader  sense,  the  author  briefly  touches  upon,  — 
such  as  the  Standard  Oil  Trust,  the  Cordage  Trust,  Railway  Pooling, 
Steamship  Line  Combines,  Pork-Packing,  Brewing  and  Distilling  Com- 
bines, School  Book,  Wall  Paper,  and  Playing  Card  Trusts,  the  Steel 
Trade  Combine,  the  Western  Union  Telegraph  System,  General  Elec- 
tric Companies  Trust,  Express  Service  Combines,  besides  Gas  and 
Water,  and  Postal  Service,  Copyrights,  Patents,  etc.  The  author's 
point  of  view  is  not  controversial,  but  elucidatory  and  impartial,  — 
seeking  not  to  take  sides  for  or  against  "  Combines,"  still  less  to  pass 
judgment  upon  them  from  a  moral  standpoint.  He,  of  course,  holds 
up  to  view  their  evils,  —  economical  and  political,  —  but,  on  the  other 
hand,  he  points  to  their  manifest  industrial  advantages.  He  shows 
how  legislation  has  opposed  them  and  sought  to  hold  them  in  check, 
and  he  quotes  both  statutes  and  the  decisions  of  jurists  as  repressive 
measures.  Reference  is  also  made  to  Trusts  and  their  relation  to  the 
Stock  market;  while  the  subject  is  briefly  considered  as  the  outcome 
of  a  system  of  Protection.  Here,  as  throughout,  the  author  does  not 
take  sides,  but  contents  himself,  in  the  main,  with  a  survey  of  facts. 
So  neutral  is  the  author,  and  averse  from  bias,  that  while  he  writes  of 
monopolies  as  "  despoilers,  oppressors,  and  impoverishers,"  he  at  the 
same  time  commends  them,  as  among  the  blessings  of  civilization,  in 
giving  encouragement  to  the  invention  and  improvement  of  machinery 
and  to  the  vast  array  of  modern  labor-saving  processes  which  the  age 
—  even  an  age  of  combines  and  trusts  —  has  produced. 


THE   MACMILLAN   COMPANY 

ee  FIFTH  AVENUE,  NEW  YORK 


MONOPOLIES  AND  TRUSTS 


BY 


RICHARD  T.   ELY,  Ph.D.,  LL.D. 

Director  of  the  School  of  Economics,  and  Political  Science 

and  History  ;  Professor  of  Political  Economy 

at  the  University  of  Wisconsin. 


lamo.    Half  Leather.    $i.»s,  net 


"  A  highly  valuable  contribution  to  an  important  subject,  .  .  . 
the  best  piece  of  work  that  Professor  Ely  has  yet  done.  .  .  . 
In  any  case  all  readers  will  be  impressed  by  the  perfect  candor 
and  scientific  reserve  which  characterize  the  book." 
—  Prof.  Charles  A.  Bullock,  in  the 

American  Journal  of  Sociology. 

"Probably  no  man  has  a  better  claim  than  Profjessor  Ely  to 
speak  with  authority  on  the  industrial  movement." 

—  Tribune  (Chicago) . 

"  Suggestive,  explicit,  and,  in  a  word,  a  capital  text-book  for 
the  student  ox  for  the  man  of  business." 

—  Times-Herald  (Chicago) . 

^It  is  admirable.       It  is  the  soundest  contribution  on  the 
subject  that  has  appeared."  —  Prof.  John  R.  Commons. 

"By  all  odds  the  best  written  of  Professor  Ely's  work." 
—  Prof.  Simon  N.  Patten, 

University  of  Pmnsylvania, 


THE   MACMILLAN   COMPANY 

66  FIFTH  AVENUE,  NEW  YOBS 


RETURN     CIRCULATION  DEPARTMENT 
T0~^     202  Main  Library 


LOAN  PERIOD  1 
HOME  USE 

2 

3 

4 

5 

6 

ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 

RENEWALS:  CALL  (415)  642-3405 

DUE  AS  STAMPED  BELOW 


SEP161988 


^J00J5aSB>i6 


% 


SENT  ON  ILL 


JIJN  Q  8  199^ 


U.  C  3ERKELEY 


UNIVERSITY  OF  CALIFORNIA,  BERKELEY 
FORM  NO.  DD6,  60m,  1/83  BERKELEY,  CA  94720 


1  J  l_  v> 


U.C.  BERKELEY  UBRARIE 


C00S3aSD37 


ivil41157 


^S- 


C^ 


THE  UNIVERSITY  OF  CAUFORNIA  UBRARY 


^y 


